This article examines food demand structure and its dynamics for 11 commodities in urban China. The analysis is based on household-level expenditure survey data for two cross-sectional surveys of Chinese households pertaining to food expenditure patterns during 1995 and 2003. Pre-committed components of commodity demands, that are insensitive to economic variables, are explored.We use the generalized quadratic almost ideal demand system (GQAIDS) for its empirical superiority to the generalized almost ideal demand system (GAIDS), and estimate the associated parameters via full information maximum likelihood procedure (FIML) accounting for endogeneity of total expenditures on food for home consumption (FAH). We also use quality-adjusted commodity unit values to control for quality differences resulting from commodity aggregation and food choice. Furthermore, we derive GQAIDS elasticity formulas, and estimate income elasticities without restrictions.The results partially support the hypothesis that an average Chinese household has incorporated elements of Western diet (fine grains) into traditional Chinese food diet over time. Moreover, the outcome of a simple test developed here points to possible preference changes for a majority of food staples under study.JEL classifications: Q11, Q13, Q17

Urbanization in China has been on a steady rise recently, which has contributed to the changing consumer food preferences and consumption patterns. This carries significant implications for food security in China and the global food trade, given the role China plays on global food markets. This study investigates the effects of urbanization on food demand in China by developing a structural framework that incorporates urbanization into a theory-plausible demand system. It also considers the effects of urbanization-induced loss of agricultural land and deteriorating soil quality on food supply. Modeling the demand and supply components simultaneously allows us to undertake equilibrium analysis to determine prices. Based on the urbanization elasticities derived and estimated in this study, our findings indicate that urbanization has reduced demand for grains and fats, while increasing demand for meats, seafood, fruit, vegetables and eggs.

Price endogeneity has been ignored in previous analyses of food demand in urban China. We exploit data provided by the China National Bureau of Statistics on agricultural commodity supply shifters and use reduced‐form price equations to account for price endogeneity. Applying our unique econometric approach to the analysis of provincial‐level food demand in China, we find strong statistical evidence of price endogeneity. Models that ignore price endogeneity result in substantially biased elasticities and misleading estimates of future food demand in China.

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