The impact of domestic market fragmentation on China's food import prices

As the China's imported food volume is increasing for more than 10 years, the higher import prices and price differences in various regions are attracting more attention. Based on the micro‐firm database of China Customs from 2004 to 2015, this study explores the impact of market fragmentation on food import prices at the HS8. The study finds that fragmentation of the domestic market has a positive effect on import food prices. Domestic market fragmentation has created a favourable environment for price discrimination, resulting in the food import price difference in various domestic regions. Foreign firms export food to high‐income regions with high‐quality in order to set higher price, which eventually led to the high and rising food import price in China. For this reason, actively promoting the domestic cycle and deepening the market integration of the domestic food market are the two key points to maintain high‐quality development of China's import food industry.