China’s Economy in the Post-WTO Environment

China’s Economy in the Post-WTO Environment

Stock Markets, FDI and Challenges of Sustainability

Advances in Chinese Economic Studies series

Edited by Lilai Xu

The book explores the implications of both the extension of the market into key parts of the Chinese economy and the integration of China into the global economy. The main focus of the book is on the role and nature of China’s financial system and its ability to transform enterprise and household behaviour and the performance of investment finance, notably in the context of a two-way flow of foreign direct investment. All the extensive chapters highlight the issue of sustainability – some see the incompleteness of market reform as a problem; others are more willing to accept a pragmatic blending of the operation of the free market and government intervention.

Chapter 8: Fluctuations of Prices in the World Grain Market: Policy Responses by the Chinese Government

Wei-Ming Tian and Zhang-Yue Zhou

Subjects: asian studies, asian economics, economics and finance, asian economics, financial economics and regulation, international economics


Wei-Ming Tian and Zhang-Yue Zhou INTRODUCTION The grain price hikes in the international market during 2007–08 were most astonishing and attracted much attention all around the world.1 In mid-2007 the prices of wheat and corn started to increase sharply. In early 2008, the price of rice also started to rise steeply. According to the data published by the World Bank, the price of wheat peaked by March 2008 to reach US$440 per tonne. In April 2008, the price of rice reached its climax, at US$907 per tonne, while the price of corn peaked in June, at US$287. Compared to the price level in May 2007, the month before the price hikes started, the peak prices were, respectively, 125 percent, 186 percent and 52 percent higher for wheat, rice and corn. In response, governments in many countries took interventionist measures over the food prices in their domestic markets in order to achieve urgent socioeconomic objectives, such as food security and social stability. However, with the deepening of the global financial crisis, the prices of grains declined sharply in the latter half of the year. By the end of 2008, the prices of wheat, rice and corn fell from their respective peaks by 50 percent, 41 percent and 36 percent (World Bank, 2009). The fluctuations in grain prices at such a speed during such a short time span is most detrimental to the management of food economies of many countries, especially those developing countries whose food security has...

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