Chinese Food Consumption

Table of Contents

Chapter 1: Introduction3

Chapter 2: Literature Review6

Chapter 3: Methodology11

Chapter 4: Results and Discussion16

Chapter 5: Conclusion30

References33

Appendix A: Equations and Tables35

Chinese Food Consumption

Chapter 1: Introduction

China's remarkable income growth has changed food landscape in recent years, with the emergence of a new middle class of consumers, the rise of supermarkets, and expanded availability of food products. As their incomes increase, Chinese consumers are changing the pattern of their food consumption in two ways. First, consumers purchase higher quality foods as reflected in paying higher unit values of food purchased for branded, safety certified, better cuts of meat, or other premium quality. Second, differing income responses for quantity and quality demanded of different food categories mean that the nutritional composition of the foods they consume has changed as their incomes increase. The changes in foods purchased have important implications for public health concerns about rising fat intakes and for opening new market opportunities of increasing imported foods and other premium-priced products.

Many studies of food demand in China, like Liu and Chern (2001), have assessed the changing quantity demanded for various foods in China - typically finding that meat, poultry, fish, and dairy products are most responsive to income growth, while grains are less income-elastic. The results of such studies led many economists in the 1990s to predict that China's demand for meats would outstrip its production capacity and create demands for imported grains and meats. These predictions did not come to pass, however. Despite unprecedented economic growth and rising living standards, China was a net exporter of grain and aquaculture products in 2007 and essentially self-sufficient in meats.

In Engel analysis, the trends in food expenditure are assumed to reflect the trend in the quantity of food purchased. However, in modern food markets, the expenditure on food may grow faster than the quantity of food purchased and demand for higher “quality” of foods with higher unit values. The quality component of food expenditures arises from the heterogeneity of food products with varying degrees of processing, marketing services, and safety attributes within a food category. For example, “meat” can include various cuts of meats, processed meat products, organic products, and meats purchased from retail outlets that differ in their convenience or reputation for quality.

An increase in expenditures on a particular food category may reflect an increase in quantities purchased or a shift in the composition of products purchased within that food category. The shift in composition toward premium products increases the average unit value (expenditures per kilogram) of products purchased. Thus, the increase in unit value is an indication of food “quality.” Only a few literatures had focused on the demand for food quality. Prais and Houthakker (1971) measured quality elasticities based on the British working-class budget collection of foods. Hassan and Johnson (1977) analyzed food consumption patterns of urban families in Canada by measuring income, expenditure, and quality elasticities.

In addition, it is well known that rising incomes tend to be associated with a shift from plant-based to animal-product-based diets, but only a ...