Changes of China’s Position in the World Food Trade Network

Congxian HE, Xiuxiang LI

School of International Economics and Trade, Jiangxi University of Finance and Economics, Nanchang 330013, China

Abstract "Ensuring stability in foreign trade" and "ensuring food security" are essential parts of China’s "six priorities" and "stability in six areas". Based on the data of bilateral food trade between countries during 1996-2018, using descriptive statistical analysis and social network analysis methods, this paper analyzed the changes of China’s trade position in the world food trade network. It reached the following results. (i) China’s position in the trade network has undergone a phased process of "remarkable improvement-continuous fluctuation-significant decline-steady growth". (ii) Export participation is better than import participation, the gap between trade export strength and import strength is widening, and the effective scale and constraint index gradually improve. (iii) The change of China’s position in the food trade network is affected by geographical, economic, institutional and cultural factors. In view of these findings, it is recommended to improve node centrality, enhance network participation, improve network interconnection, and prevent international market risks, so as to better deal with the complex international environment.

Key words Food security, Food trade network, Social network analysis, China’s position

1 Introduction

Food is god for the people, while the grain is the top priority for the food. China is a country with large population. Ensuring the food security is like the ballast stone for economic and social development. Developing the food trade is the "regulating valve" and "stabilizer" of food security. Since 2003, Chinese government has issued a series of policies for promoting the agricultural development, which promotes the grain yield increase. The per capita share of grain increased from 333.29 kg in 2003 to 481.76 kg in 2015, increasing by 44.55%. Besides, China’s food consumption and import dependence have also continued to increase. Since 2009, China has become a net importer of the three major staple foods. As of 2019, net imports have increased by 5.6 times (according to WIND Economic Database). China’s importing countries are relatively concentrated. The USA, Australia, Vietnam, Thailand, and Canada have been in the top five for many years, and their total imports generally account for more than 80% of China’s import market share.

China’s grain trade competitiveness index remained negative during 2009-2019, and it has been at a competitive disadvantage for a long time. In recent years, the forces of counter-economic globalization have become stronger and trade protectionism is rampant. Droughts, floods, locust plagues, and epidemics have caused unprecedented challenges to global food trade, and China’s food import security risks have also increased sharply. "Ensuring stability in foreign trade" and "ensuring food security" are key tasks of China’s "six priorities" and "stability in six areas", which reflect the original aspiration of the CPC and China’s strength. In February 2020, General Secretary Xi Jinping stated that the more we face risks and challenges, the more we must stabilize agriculture, and the more we must ensure the security of food and important non-staple foods. From 1996 to 2018, especially in the face of changes unseen in a century, what are changes in spatial pattern of food trade? What is China’s position in this trade network? How to keep the bottom line without occurrence of systematic risk? These problems are urgently needed to be studied in depth.

2 Literature review

Social network analysis originated from the sociology. Most studies are based on multiple disciplines, and international trade network is an important application in economics. In recent years, Chinese scholars are caring more about the study of the evolutionary rules and structural characteristics of international trade networks. Based on the total volume of world trade, Zhao Guoqin studied the characteristics of the trade network. Using the community detection and social network analysis, Liu Zhigao

et

al.

revealed the medium and long-term evolution trend of the world trade network. Most scholars studied the intra-regional trade networks, such as the Belt and Road, BRICS countriesand so on. In addition, some scholars studies trade network inside industries or products, such as agricultural products, and high-end manufacturing industry,

etc.

Most scholars take the overall trade network of agricultural products as the research object, while the research results on the grain trade network are few. Using agricultural product trade data during 1996-2013, Ma Shuzhong

et

al.

studied the centrality, connection strength and heterogeneity of the global agricultural product trade network. Taking 65 countries along the Belt and Road as the research object, Zhan Miaohua built a network of agricultural products trade in countries along the Belt and Road, and analyzed the overall network structure and its influencing factors. Only a few scholars studied the food trade network. For example, Han Dong elaborated the evolution mechanism through analyzing the spatial structure characteristics of the food trade network among countries along the Belt and Road.Through sorting out the relevant research literature, it is found that the research on the food trade network still needs to be deepened. (i) Most existing studies are carried out on mineral resources, industrial products,

etc.

The research on food needs to be strengthened. (ii) Research results on changes of China’s position are still insufficient. (iii) Data that can cover the complete time scale of the global trade network and reflect the evolutionary process needs to be further expanded. The marginal contribution of this study is: based on the world’s food trade data during 1996-2018, taking the food trade network as the research object, breaking through the general linear thinking logic, taking into account the spatial and temporal dimensions, we built a 23-year evolution map of the world food trade network, analyzed the rules of changes of China’s food trade position, in order to provide a theoretical basis and decision-making reference coping with changes in the international food trade pattern.

3 Construction of food trade network model and data sources

3.1 Construction of network model

Taking the country as the network "node" and the food import and export relations between countries as the "edge", we can establish the food trade network system, expressed in

G

= (

V

,

S

,

A

,

W

), where

V

={

v

,

v

, …,

v

} denotes participating countries in world food trade,

S

={

S

} denotes the relations between trading countries, adjacency matrix

A

={

a

} denotes the unweighted network of world food trade, and the weight matrix

W

={

w

} denotes the weighted network of world food trade. According to the parameter setting method of the network, when there is a trade between the two countries, namely,

w

>0, then

a

=1; when there is no trade between the two countries,

w

=0, then

a

=0.

3.2 Indicator description

3.2.1

Overall network characteristics. The overall network scale is the number of all social actors included in the network. The larger the scale, the more complex the composition of internal actors. The centralization refers to the centrality of the network. The larger the value, the higher the concentration of the network and the closer the actors are connected. Density refers to the ratio of the number of actual trade relations of the network to the theoretical maximum value. The larger the value, the more active the actors will be. Reciprocity refers to the ratio of the number of import and export two-way trade flows to the total number of connections in the network. The larger the value, the stronger the relationship between actors.

3.3 Data sources

The Food and Agriculture Organization (FAO) of the United Nations generally uses "cereals" to define "grain" (food), including wheat, rice, barley,

etc.

In order to ensure the consistency of the statistical caliber of the data, we determined the research category of "food" as cereals. The data were selected from the bilateral trade data of cereals (HS10-Cereals) in the world under the HS96 code in the CEPII database. Considering the availability and timeliness of data, we determined the research window period as 1996-2018.

4 Changes of China’s position in the world food trade network

Through the construction of unweighted and weighted food trade network, it is found that the world’s food trade network shows the following overall network characteristics: obvious expansion trends, increasing reciprocity, and large fluctuation of network centrality; it also shows the individual network characteristics of unbalanced trade spatial distribution, high network concentration, and strong heterogeneity. As an important participant in this trade network, China is not only affected by the evolution of the overall network, but to a certain extent, it has also promoted the change and reshaping of the trade network pattern.

4.1 Stage characteristics of changes

In 1996-2018, China’s position in the world food trade network experienced four major stages.

4.1.1

Significant improvement (1996-2003). At this stage, both the out-degree and out-strength of China were improved, the in-degree and in-strength were low, the structural hole index showed a positive trend, which is reflected in the growth of food exports and the diversification of the export market. Specifically, the overall degree of out-degree centrality showed a fluctuating upward trend, increasing from 0.281 7 to 0.575 5, but mainly in South Korea, Japan and Southeast Asian countries; the out-strength showed an upward trend, and the ranking in the world network jumped from the 20to the top 3. China’s in-degree level remained low, and the import market was concentrated in major food producing countries such as the USA, Australia, and Canada; the in-strength showed a fluctuating downward trend, declining from 0.579 2 to 0.054 2. China’s structural hole index showed a positive trend. The world rankings of the effective scale index and the constraint index rose from 14and 13to 6, respectively.

Geographical factor is a main reason for determining the trade pattern at this stage. Food production depends on natural conditions such as land and climate. The USA, France, and Canada benefit from their unique natural conditions. The combined yield of these three countries accounts for one-fifth of the world’s total yield, and has become China’s main source of imports. Food belongs to dry bulk cargo, and the cost of transportation between close countries is low, and trade is prone to occur. For example, at this stage, Thailand and India’s exports to China increased; Japan, South Korea, Malaysia and other countries were China’s main export markets.

4.1.2

Continuous fluctuation stage (2003-2008). At this stage, China’s out-degree and in-degree in the food trade network slowly increased, out-strength continued declining, in-strength was unstable, and the structural hole index fluctuated. The out-degree increased from 0.575 5 to 0.696 7, and the in-degree increased from 0.146 2 to 0.165 9. The growth rates of both were relatively small; both out-strength and in-strength fluctuated greatly, and their rankings in the network dropped by 20 levels. In addition to the United States, Canada, Australia and other countries, China’s import source countries also included India, Burma and other Asian countries; In addition to neighboring countries, the export market also included African countries like Egypt. The structural hole index showed a fluctuating upward trend. The effective scale index increased from 99.54 to 119.87, the constraint index declined from 0.036 3 to 0.032 6, and the ranking of both indicators rose from 6to 3.

The positive sum game is the source of international trade cooperation, and economy of scale can promote intra-industry trade. Besides, a free and open economic environment will promote trade development. At this stage, rare natural disasters occurred globally, such as droughts in India and Argentina, tornadoes in the USA, and floods in France and other regions, which greatly affected the food production. However, regional trade agreements (RTA) continued increasing, the number of RTAs has increased by 73, and the number of Chinese trading partners also continued increasing. At the same time, the rapid development of agriculture in Southeast Asian countries has become China’s main source of imports.

4.1.3

Significant decline stage (2008-2015). At this stage, China’s out-degree in the food trade network showed a downward trend, in-degree increased, the gap between out-strength and in-strength continued widening, and the structural hole index declined. The in-degree rose slightly from 0.165 9 to 0.210 3, but the out-degree declined from 0.696 7 to 0.542 1, and the world ranking fell from the top three to 10th, indicating that China’s export market was shrinking; the out-strength dropped from 0.020 6 to 0.005 2, dropping 23 levels in the ranking, but the in-strength increased by 15 times, making China become the world’s number one. These indicate that China’s food export was decreasing, but the import increased rapidly, and there is a significant gap between the export and import. The structural hole index was worsened. The effective scale index dropped from 119.87 to 89.00, and the constraint index rose from 0.032 6 to 0.034 7. The rankings in the network fell from the top three to the out of top ten.

At this stage, the combined effect of economy and system has reshaped the trade pattern. After 2008, the global climate situation became more severe, weather disasters occurred frequently, and the financial crisis broke out, panic was widespread and many countries promulgated the food policy of "rewarding import and limiting export", which resulted in the shrinking trade. Domestic food supply and demand are unbalanced, and domestic and foreign food prices are upside down. The strange phenomenon of "all three increases" in output, inventory, and imports appears. The domestic food supply and demand became unbalanced, the domestic food price became higher than exported food price, and there appeared the strange phenomenon of simultaneous increase of yield, stock, and import. China suffered the dilemma of "domestic trouble and foreign problem", and the ranking in the world food trade network declined.

4.1.4

Steady growth stage (from 2015 to the present). At this stage, China’s out-degree in the food trade network is rising in-degree shows a downward trend, out-strength level is low, in-strength declines, and structural hole index performs well. The in-degree shows no much change, but the out-degree has risen from 0.542 1 to 0.660 5, indicating that the scope of China’s export market is expanding; the out-strength has increased by 3.25 times, the ranking in the network rose by 22, the in-strength dropped sharply from 1 to 0.711 1, and the ranking in the network remained in the top 4, showing that China’s food export volume is increasing, and the import volume is reducing. The structural hole index performance has improved. Both the effective scale index and the constraint index rank enter the top five in the food trade network.Cultural distance will directly affect the trade cost, and cultural integration is favorable for unimpeded trade and promotes the development of trade network. As an important economy of the world, China has been maliciously sanctioned by some countries in terms of trade development, which will inevitably affect important agricultural products such as food. However, China is actively carrying out the Belt and Road initiative, holding international import expos,

etc.

, to promote Chinese culture and values, promote the diversified development of trade, and expand the food export market. These changes not only rely on economic "hard power", but also benefit from the promotion of "soft power" such as institutions and culture.

4.2 Change characteristics of key change indicators

In 1996-2018, China’s position in the world food trade network has been changing. The change characteristics of key indicators are mainly reflected in the following aspects.

4.2.1

Export participation is better than import participation. The scope of China’s participation in the food trade network has expanded significantly. Among them, the overall degree of out-degree centrality showed a fluctuating upward trend, and the export market becomes gradually diversified. In 1996-2008, China’s out-degree and world ranking was in a rising stage, with the out-degree centrality increasing from 0.281 7 to 0.696 7. The relative in-degree level continued to be sluggish, the world ranking showed no much change, and the import source countries were relatively concentrated. For a long time, China’s top five food import source countries accounted for the import market share of more than 80%. Since 2010, the USA and Australia have been the top two source countries of China’s food imports, and their share of imports accounts for more than half. Therefore, the geographical structure of China’s food import trade is highly concentrated, faces greater uncertainty in external supply, and trade risks are relatively high.

4.2.2

The gap between out-strength and in-strength is widening. In 1996-2018, the relative out-strength experienced a sharp fluctuation process of "sudden increase-sudden decline-smooth growth", and the difference between the maximum value and the minimum value was 92.33 times. However, since 2008, the out-strength level has been at a low level. On the one hand, it reflects that the world’s agricultural powers have comparative advantages over China and are more competitive in the international supply market; on the other hand, it reflects that China’s exports of primary products have decreased, which is conducive to optimizing the trade structure. In 1996-2018, the relative in-strength trend of China’s food trade showed a characteristic of "small first and then large" with large fluctuations. Since 2008, the in-strength has grown rapidly, and its ranking in the world food trade network has risen rapidly, reaching 1 in 2015, ranking first in the world. Since 2015, the in-strength has declined, but it still ranks among the top four in the world. China’s food imports and its share in the world’s total food exports are on the rise. Especially since 2008, the growth has been rapid and reached a peak in 2015. China’s net food imports have turned positive since 2008, and have continued to rise since then, and the degree of dependence on imports has shown an upward trend. Therefore, the risk of international market changes will be turned to the domestic market.

4.2.3

Both the effective scale and constraint index gradually improve. In 1996-2018, China’s effective scale index in the world food trade network increased while the constraint index dropped, and it followed the rule of "the larger the effective scale, the smaller the constraint", indicating the heterogeneity of China’s food trade has improved. Specifically, the effective scale index generally showed a fluctuating upward trend, rising from 42.90 in 1996 to 111.00 in 2018, and the world ranking has also risen from 14to 4, reflecting the gradual increase in China’s trade freedom. In 1996-2008, the constraint index showed a downward trend, and has basically maintained a stable level since 2008, indicating that China’s ability to negotiate and control in the network has been continuously improving, but there is still a gap with countries with higher levels of agricultural development.

5 Conclusions and recommendations

5.1 Conclusions

(i) The scale of the world food trade network continues to expand, and presents the stage characteristics of "rapid growth-fluctuating growth-steady growth". The network reciprocity index has large fluctuation, but the overall trend is increasing, with the out-degree centralization declining and in-degree centralization rising slightly. (ii) With the evolution of the world’s food trade network, China’s trade position is also constantly changing. The overall change characteristics are mainly as follows: the out-degree centrality index is obviously higher than the in-degree centrality index; the relative out-strength is a "high to low" trend, while the relative in-strength is just the opposite; the structural hole index has gradually improved, but there is still a gap with some countries. (iii) China’s position in the trade network has undergone a phased process of "remarkable improvement-continuous fluctuation-significant decline-steady growth". (iv) The change of China’s position in the food trade network is affected by geographical, economic, institutional and cultural factors.

5.2 Recommendations

5.2.1

Expanding the food trading partner circle and increasing the centrality of nodes. In the food trade relationship, China must not only play a good role as a "receiver", but also actively become a "sender". It is recommended to strengthen overseas cooperation in grain planting, open up foreign planting bases, add "overseas granaries", and guide local large grain merchants to "go global". Besides, it is recommended to encourage trading companies to cooperate with global industrial giants, and realize strategic cooperation with international grain planting enterprises, traders, and warehousing and port logistics enterprises through capital operation methods such as financial and fiscal policy support. Taking the construction of Hainan Free Trade Port as an opportunity, it is recommended to establish an international trading center for bulk agricultural products, leading more international agricultural resources to be traded in the Chinese market. By virtue of the Belt and Road initiative, China International Import Expo,

etc.

, it is recommended to carry out bilateral and multilateral grain trade facilitation negotiations and expand the scope of grain trading partners.

5.2.2

Giving full play to the advantages of food trade and increasing the network participation. China’s central position in the world food trade network is constantly rising, showing that it has a certain influence and will promote the reshaping of the world food trade pattern. It should continue to deepen its participation in food trade. It is recommended to strengthen the agricultural technological innovation, enhance the construction and promotion of digital agriculture pilots, improve the efficiency of food production, extend the production and operation chain, and promote the large-scale domestic food production. In the field of food processing, it is recommended to cultivate the main force of the industry, vigorously build internationally well-known brands, and use new technologies and techniques to deepen the food processing to increase its added value. In addition, it is recommended to take advantage of China’s higher participation in exports and use modern information technology to replace "geographical agglomeration" through "network agglomeration" to form a virtual food industry cluster to ensure the effective implementation of the "moderate-scale import" strategy.

5.2.3

Exploiting the potential of food trade and improving the network interconnection. China performs well in the heterogeneity of the world food trade network, indicating that it has a high degree of trade freedom and strong control over trade resources. It is recommended to make full use of regional economic integration organizations such as Regional Comprehensive Economic Partnership (RCEP) countries to deeply exploit the potential of cooperation with existing trading partners, give priority to countries with more stable political relations with China, and reduce the constraints and influence of international political factors. China is negotiating and study more than 20 free trade zone agreements. It is recommended to use multilateral and bilateral negotiations to promote trade in important agricultural products. In addition, China should actively promote the signing of reciprocal trade agreements with major grain production and trading countries (Thailand, Vietnam, Ukraine,

etc.

), simplify customs clearance procedures, unify certification standards and other means to reduce trade costs.