The effects of soybean trade policies on domestic soybean market in China during the food crisis

Purpose Many grain exporting/importing countries implement temporary trade policies to intervene in grain trade volume during food crises. The purpose of this paper is to analyze the effects of Chinese soybean trade policies on the domestic soybean market during the food crisis. Design/methodology/approach A Markov switching error correction model is constructed for the empirical analysis. Market integration, market equilibrium and market stability are compared among three regimes: the normal state, crisis state and post-crisis state. In order to reduce the disturbance from external markets factors on the results, the US soybean market is selected as a control group in that it did not use any soybean intervention trade policies during the food crisis. Findings The empirical results indicate that China's temporary soybean trade policies lead to a decrease in market integration between domestic and international soybean markets and a reduction in domestic soybean market stability. Originality/value It is the first time that China's soybean market is selected as a sample and case on this issue. The regime shifting non-linear model could be more applicable because there exists a non-linear transmission relationship between grains markets during food crises. The results imply that China's temporary soybean trade policies do not improve market integration and stability. China should reconsider implementing soybean trade intervening policies to protect the domestic market and safeguard food security.