Geopolitical Risks, Commodity Market Spillovers, and Agricultural Market Instability: Evidence from China

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Geopolitical risks have emerged as a critical force reshaping global commodity markets, posing significant challenges to agricultural market stability, particularly in emerging economies with fragile market infrastructures. This study investigates whether and how geopolitical tensions indirectly influence China’s agricultural commodity market by amplifying cross-market volatility spillovers from other commodity sectors. We employ a two-stage empirical framework that combines the TVP-VAR model and the GARCH-MIDAS model to analyze dynamic spillovers and assess the explanatory power of geopolitical risk. The results show that, since 2008, overall spillover intensity has increased markedly, and the agricultural market has persistently acted as a net recipient of external risk. Geopolitical risk significantly magnifies volatility transmitted from non-agricultural commodity sectors, intensifying agricultural price instability even in the presence of strong domestic regulation. Out-of-sample results further demonstrate that global geopolitical risks, especially geopolitical threats and actions, are more effective predictors of agricultural market spillovers than China-specific geopolitical risk indicators. These findings suggest that agricultural market stabilization should pay closer attention to cross-market risk transmission under geopolitical stress, and that integrated risk management is important for maintaining agricultural market stability and food security in emerging economies such as China.