change in the aggregate cost of living).'<sup>0Farmersare alsomadeworseoff by thelower demand</sup> for farm land, the return from which<sup>is5.5percentlowerin2007followingWTOaccession</sup> reforms. Meanwhile, the real wages<sup>of skilled laborincreaseby 0.8per cent,and the rewardsto</sup> non-farm capital are 1.3 per cent higher.<sup>Together theseresultssuggesttheownersof non-farm</sup> capital gain almost the same in proportional<sup>termsas unskilledlaborers innon-farm employment,</sup> but the latter do better than skilled<sup>workers. Hence on balanceincome inequalitymayimprove</sup> slightly among non-farm households dependent<sup>mainly on laborincome.1l</sup> However, income distribution can<sup>beexpectedtoworsenasbetweenfarmandnon-farm</sup> households, although the degree depends<sup>on the proportionof farmhousehold incomeearnedoff</sup> the farm. With only 1.7 per cent of<sup>(orabout6million)unskilledfarm workers leaving</sup> agriculture for non-farm work (because<sup>of theassumedimpedimentstoout-migration),and with</sup> land returns depressed by 5.5 per cent<sup>inaddition to farmlabor returnsbeing 0.7per cent lower,</sup> the gap between farm and non-farm<sup>incomesevenwithinruralareas,and certainly between rural</sup> and urban areas, looks set to rise slightly<sup>unless remedial policy actionis forthcoming.For farm</sup> households entirely dependent on earnings<sup>fromagriculture(typeA in Table10),incomewould</sup> fall 1.6 per cent on average. This would<sup>differ little acrossthe threeregionsidentifiedin Table7,</sup> since product shares for farm output<sup>-whenfish productsare ignored -arereasonably similarin</sup> western, central and eastern provinces.12<sup>For farrn households earning 30 per cent of their income</sup> from nonfarm unskilled work, however,<sup>that income fall is only half as large (0.8per cent);and</sup> for farm households earning 60 per<sup>centof their incomefromnonfarmunskilledwork,their</sup> incomes would not decline at all (types<sup>Band C in Table10 --see rows 7 and 8).</sup> Sectoral details of the GTAP results<sup>aresummarizedin Table9.Realconsumerpricesare</sup> lowered most by WTO accession for<sup>motorvehicles,oilseedsand sugar(andfor beveragesand</sup> tobacco, although if China was using<sup>importtaxeson thoseitems as a formof consumptiontax</sup> and their decline were to be matched<sup>byanincreaseindomesticsalestaxation, thoseprice</sup>

> 10 The present version of the GTAP model<sup>hasonlyoneaggregatehousehold,soit cannotdistinguishbetween the</sup> different consumption bundles and<sup>factorendowmnentsofdifferent typesofhouseholds. Throughout,realprice</sup> changes refer to the change in price<sup>relativetotheconsumer price index change,giventheconsumptionbundleof</sup> the aggregate household.

> " Wages of skilled workers might<sup>increasemorethansuggestedhereaswedo notcapturetheendogenous</sup> productivity growth resulting from the<sup>substantial liberalizationof the servicesectors.</sup>

> 2 However, if we look at northern and<sup>southernprovincesinChina,differences could be largesincewheat,maize,</sup> soybean and cotton are planted primarily<sup>innorthern China, whilerice,horticulture,livestock andfish areraised</sup> mostly in southern China.

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