China's Potato Industry and Potential Impacts on the Global Market

American Journal of Potato Research, Mar/Apr 2004 by Wang, Qingbin, Zhang, Wei

ABSTRACT

While China has been the world's largest potato producer since 1993 and accounted for more than 80% of the increase in global potato production from 1990 to 2002, few studies have analyzed the remarkable growth in China's potato industry and its potential impacts on the global market. This paper reviews the development and growth of China's potato industry since 1961, especially since the economic reforms started in 1978, identifies major factors that have contributed to the dramatic growth in China's potato production in the past two decades, examines the trends of China's potato production and consumption, and discusses the potential impacts of China's potato industry on the global market. Results suggest that China's ongoing transitions in economic system and food-consumption patterns will contribute to further growth in its potato market and China's potato output may reach 71 mmt in 2006 and 81 mmt in 2010. Furthermore, China as the world's largest potato producer and a new member of the World Trade Organization (WTO) will play an increasing role in the global market of potatoes and potato products.

RESUMEN

Aun cuando China ha sido el mayor productor de papa en el mundo desde 1993 y es considerado como el reponsable de mas del 80% de incremento mundial de la produccion de papa durantes los anos 1990 al 2000, muy pocos estudios han analizado el notable crecimiento de la industria de papa en China y su impacto potencial en el mercado mondial. Este articulo hace una revision del desarrollo y crecimiento de la industria de la papa desde 1961, especialmente desde las reformas iniciadas en 1978, identiflca los factores principales que han contribuido al dramatico crecimiento en la produccion de papa en las dos ultimas decadas, examina las tendencias de produccion y consume de la papa en China y discute el impacto potencial de la industria de papa en el mercado mundial. Los resultados sugieren que la transicion que se esta efectuando en los patrones del sistema economico y consume de alimentes contribuiran a un crecimiento mas amplio en su mercado de papa y la produccion en China puede llegar a 71 mil millones de toneladas metricas en el ano 2006 y 81 mil millones de toneladas metricas en el 2010. Ademas, China como el mayor productor de papa del mundo y un nuevo miembro de la Organizacion Mundial de Comercio (WTO), jugara un rol cada vez mayor en el mercado mundial de la papa y productos derivados.

Accepted for publication 26 September 2003.

ADDITIONAL KEY WORDS: China's potato industry, potato trade, French fry, WTO, regression analysis.

INTRODUCTION

While the world potato production increased only 13.8% from 1961 to 2002, China's potato output increased by more than four times, from 12.91 million metric tons (mmt) to 66.60 mmt, over the same period (FAO 2003). As a result of the remarkable growth in China's potato production and the collapse of the former Soviet Union into 15 independent states, China became the world's largest potato producer in total output in 1993 and in total harvest area in 1995 and has remained as the largest producer ever since (FAO 2003). In terms of percentage shares, China's potato production accounted for 21.6% of the global output in 2002 as compared to only 4.8% in 1961, 7.9% in 1971, 9.2% in 1981, and 11.9% in 1991. Over the period of 1990 to 2002, 82.7% of the increase in the global potato output was from China (FAO 2003).

With increased potato production and consumption and a gradual transition towards a market economy, China has significantly expanded its trade of potatoes and potato products in the past two decades (Zhang et al. 1999; FAO 2003). For example, China's potato exports increased significantly in the 1980s and reached the record high of 110,790 tons in 1991, then declined sharply in the next four years, but has increased rapidly since 1995, from 29,973 tons in 1995 to 82,441 tons in 2001 (FAO 2003). China started to import frozen potatoes in 1986 and the import has increased steadily ever since, from 973 tons in 1986 to 16,064 tons in 1990 and reached the record high of 82,731 tons in 2001 (FAO 2003). Although China's potato trade is still very limited as compared to the size of its potato market, its commitments and benefits as a new member of the World Trade Organization (WTO) are expected to increase its trade of potatoes and potato products in the coming years (Zhang et al. 1999; People's Daily, June 10, 2002).

While most of the previous studies related to China's potato industry have focused on China's position in the global potato-production distribution or the ecological and agronomic aspects of potato production in China (e.g., The International Potato Center 2002; Hijmans 2001; Scott et al. 2000; Walker et al. 1999; He 1997; Ye 1957), Zhang et al. (1999) conducted an econometric analysis of U.S. frozen french fry exports to Greater China (Mainland China, Taiwan, and Hong Kong) to identify major factors for the rapid growth in U.S. frozen french fry exports to the three markets from 1987 to 1997 and to forecast U.S. exports over the period of 1998 to 2005. While the significant factors identified by the study include U.S. foreign direct investment in China, price of U.S. frozen french fry exports, number of McDonald's restaurants in China, price of Canadian frozen french fry exports, and Chinese consumer income, the study predicted that U.S. frozen french fry exports to the three markets, especially Mainland China, would increase at a significant rate from 1998 to 2005. Although the study was based on time-series data of only 11 years and included only one particular potato product, it was one of the first econometric studies on China's potato economy and demonstrated that econometric models could be used to analyze China's potato market.