Is China's domestic agricultural market influenced by price fluctuations of the world agricultural commodities in the short-run?

Abstract

After entry into the WTO, China’s domestic agricultural market is more and more closely integrated into the world market. Recently, a significant price fluctuation of agricultural commodities in the global market has increased concerns over its impact on the economic stability in those developing countries such as China, which has a large import and export of agricultural commodities every year. This paper attempts to study the short-term impact from price fluctuations of the world agricultural commodities upon the China’s domestic agricultural market by investigating the dynamic correlation between the price change in the world and Chinese market in the copula framework. Our findings suggest a weak but strengthening short-run impact with an asymmetric nature. At the same time, diversified short-run impacts are observed in four main agricultural commodity markets. Empirical results show that the world price fluctuation has a volatile but decreasing influence on the China’s rice market. This volatility of price impact is also observed in the wheat market but it has an escalating trend. The corn market experiences an intensified price shock with a distinct stage characteristic and the soybean market is under the strongest influence from the international price fluctuation.