Abstract: The basis and prerequisite for building a new “dual circulation” development pattern is to form a large open, competitive and orderly unified domestic market as soon as possible. At present, the development of factor markets lags far behind that of commodity markets, and the barriers are mainly vertical government governance, horizontal government governance and corporate market power. The reason why vertical government governance hinders the formation of a unified market lies mainly in the fact that China’s modernisation process is aiming to catch up with Western countries, and the growth catch-up strategy requires more power of the government’s visible hand; while the reason why horizontal local government governance hinders the formation of a large unified domestic market lies in the fact that China’s local governments, in the face of market-oriented reforms, are running with entrepreneurial approaches, and local government-led industrial policies are becoming a tool to carve up the market. This paper discusses the path and policy options for the construction of a unified domestic market from seven aspects: scale, structure, function, mechanism, organisation, space and environment.