Integration of Major Agricultural Product Markets of China

Abstract

China's accession to the World Trade Organisation (WTO) raises two key questions. One is whether China's local markets are integrated and the other is whether China's markets can coordinate with world markets. This paper uses 3-step methods to answer the above questions. In the study, co-integration analysis is applied to test market integration, Granger-causality test is used to analyse the direction of price spread between markets, and IMC (Index of Market Connection) method is employed to measure the connection degree between markets. The results show that long-run market integration exists among local markets. China's major agricultural product markets are also integrated with world markets in the long-run. However, except for two pairs of domestic hog markets, short-run integration is not found both between domestic markets and between domestic and world markets. Market connection degrees are different for different products. Finally some policy implications are suggested