The overall goal of this study is to determine the extent by which genetically engineered (GE) crops in China can lead to reductions of pesticide use, the nature and source of the reductions, and whether or not there are any non-pecuniary externalities. One of the first studies of the effect of plant biotechnology on poor farmers, the study is based on a data set collected by the authors in 2000 in North China. The paper's descriptive, budget and multivariate analysis find that Bt cotton significantly reduces the number of sprayings, the quantity of pesticides used and the level of pesticide expenditures. All Bt cotton varieties-both those produced by foreign life science companies and those created by China's research system are equally effective. In addition to these input-reducing effects, the paper also demonstrates that such reductions in pesticides also likely lead to labour savings, more efficient overall production, as well as positive health and environmental impacts. © 2003 Elsevier B.V. All rights reserved.