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Abstract:
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The objective of this study is to examine China’s import demand for cassava using the Linear Almost Ideal Demand System (LADIS) model. Quarterly data of prices and import values of cassava product (HZ 071410) imported from Thailand, Vietnam and Indonesia during 2007-2017 are employed to estimate the price elasticity of demand for cassava, cross price elasticity of demand and the expenditure elasticity of demand
Own-price elasticities of China’s import demand for cassava from the three countries are inelastic, implying that cassava products are essential for China. This may be because China has formulated a strategic plan for energy development. As such, China has to import cassava products to obtain sufficient quantities for demand. Even though China has imported most of cassava products from Thailand, price elasticity of demand for cassava imported from Thailand is more elastic than those of the two countries, price elasticity of demand for cassava imported from Thailand, Vietnam, and Indonesia are -0.870 -0.261 and -0.085, respectively. This may be explained by increasing cassava exporters to China. Cross-price elasticities of China’s import demand for cassava reveal that, cassava imported from Thailand and Vietnam and cassava imported from Vietnam and Indonesia are complementary, whereas cassava imported from Thailand and Indonesia are substitutes. Expenditure elasticities of demand for cassava imported from Thailand, Vietnam, and Indonesia are 1.090 0.942 and -1.173, respectively. As such, cassava imported from Thailand and Vietnam are considered normal goods in China while cassava imported from Indonesia are considered inferior. However, expenditure elasticity of demand for cassava imported from Thailand is more elastic than that from Vietnam. To increase the competitive advantage of Thai exported cassava, the government should encourage research and development to improve the quality of cassava products and decrease production/exporting cost. Moreover, Thai cassava producers and/or the government should find additional markets for cassava products to reduce export dependence to China.
Keywords: Demand, Cassava, China
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