China has the third-largest sheep flock in the world, comprising mostly hardy, dual-purpose breeds of the carpet-wool type. Since the 1950s, Merino genetic stock has been introduced. However, the State-controlled pricing system contained little recognition of appropriate yield and quality differentials until recently, and this has hampered the development of the whole wool sector.
Now, in line with the overall liberalisation of the economy, economic forces are playing a larger role in the wool sector, and China has begun to auction wool in Xinjiang, Inner Mongolia and Nanjing. Wool is a major source of income for some 90 million people in minority groups in northern China, many of whom are among the poorest in the country. Such pricing moves may therefore increase incentives for improved management, with considerable impact on the regional and national economies.
Wool processing has also undergone important changes in the past decade. Provincial and county governments have been able to establish processing plants apart from those planned by the central government, resulting in a rapid increase in processing capacitya factor in China’s emergence as a large-scale importer of wool.
China’s wool industry is thus in a state of flux, with major changes under way in both production and the marketing and processing sectors. Their ramifications and the technical, economic and institutional constraints to further modernisation of the industry are still imperfectly understood, not only by interested outsiders such as Australia but within China itself, and the present project will apply economic analysis to the problem of improving wool production and marketing there.
Research teams will carry out extensive field work in at least two of the three main wool-producing environments of northern China. This field worka mixture of formal data collection using carefully constructed questionnaires and less formal, but equally valuable, observations, will aim at a full understanding of the present farming/grazing systems and of recent changes in them. At the same time, the researchers will study the marketing chain and local processing plants. Both while carrying out the field work and at other times, they will assemble available information about past trends and possible future options.
In the first year, the research will concentrate on the grasslands of north-eastern China, in the 11 counties of Chifeng City in eastern Inner Mongolia; this area has already been the subject of a small pilot study and contains several large ‘pasture improvement’ projects. Once the researchers have refined their methodology here, they will be better equipped to tackle the more remote and difficult north-western provinces in years two and three. In the second year, field work will move to Gansu Province, in an area representative of the drier ‘near’ north-western woolgrowing region.
During the third year primary data collected during the first 2 years will be integrated with all available secondary data and general information to prepare comprehensive reports on Chinese woolgrowing and marketing. All available data will be analysed quantitatively when appropriate.
Relatively simple regression techniques may generate new insights into such questions as: the relative efficiency of resource use in different segments of the industry; the shape of implicit cost curves and economies of flock size; the impact of newly adopted technology on production potential for households; and factors influencing the marketing margin and/or farm-gate price for wool.
Consideration of future options may require a simple linear programming approach to modelling alternative production and marketing opportunities. In addition, great emphasis will be placed on accurately describing the industry and its problems, and thus promoting greater understanding in both China and Australia.