Grain market integration and marketing margin in China

Abstract

With China’s accession to the World Trade Organization (WTO), the country’s enormous population and market have captured the world’s attention. Access to China’s agricultural markets (especially its grain markets) has become a primary focus for major agricultural commodity exporters. The question of who well China’s grain marketing system works, however, still causes concern. Can China’s grain producer/farm gate, wholesale and urban/retail markets coordinate efficiently? What is the nature of the relationships among them? How much attention should the Chinese government pay to wholesale, retail and producer markets? Questions like these are being asked with increasing frequency and urgency both within China and around the world. Research on spatial market integration shows that China’s grain markets are not highly integrated, and that the government should therefore rescind controls on grain trade. Using integration and marketing margin analysis, this paper examines the relationships among Chinese producer markets, wholesale markets and retail markets, to determine how well the Chinese grain market works. The finding should be able to assist the Chinese government in the management and construction of a grain marketing system, and also provide information about Chinese grain markets to domestic and foreign grain traders.