Not the priciest, but the best quality: A new interpretation of high import food price in China

Abstract

Against the background of rapid increases in food imports, high food import prices have become an important issue for China. This paper first establishes the theoretical relationship between per capita income and import price, then uses a panel data fixed effect model and an instrumental variable estimation based on highly disaggregated firm‐level import data from the General Administration of Customs to analyze food import prices. This paper studies the impact of China's per capita income on the food import price and the key role of imported food quality in price formation for imported food in China. The study finds that the increase in per capita income has a significant, positive influence on the price of imported food in China, but this positive impact on the price is due to quality upgrading. The results suggest that while the increase of per capita income in China has generally pushed up import food prices, it has been mainly due to imports of higher‐quality food. There is no evidence that Chinese consumers are being fleeced by foreign exporting country or are seeking expensive products to flaunt their wealth. Chinese consumers are upgrading their diet with higher‐quality food imports. [EconLit Citations: F13, F14, Q17, Q18].