Research On Chinese Rare Earth Products Supply Problem Under The Background Of Globalization

Rare earth is the strategic non-renewable resource, which is widely used in various fields of national economy. It does not only contribute to many emerging industries such as the new energy, new materials, environmental protection, aerospace, electronics and information etc., but also conducive to the upgrading of the traditional industries. Rare earth plays an imperative role in industrialization, information technology, urbanization and modernization of agriculture. Arguably the globalization escalates the intrinsic conflict between non-renewable resources and sustainable economic development. Each country pays more attention to the stable supply of rare earth products. It should be noted that US, Japan and EU reckon rare earth as a national key strategic resource. In particular, China’s rare earth reserves account for about 23% of the world, and China has become the world’s largest rare earth products supply country. However, China lost the lawsuit against US, Japan and EU concerning its rare earth export restriction policy. There is still a long way to go before the rare earth industry of China to get out of trouble. Analyzing these problems profoundly and taking countermeasures to guard the security of the rare earth supply are vital to the Chinese resources security and sustainable development of Chinese economy.Scholars have got fruitful research results in the study of rare earth problems. However, in terms of the supply of rare earth products, there are relatively less systematic studies overseas. While in the domestic literatures, there are more qualitative researches than quantitative researches. In this paper, the author would apply a variety of research methods, including but not limited to literature research, metrology research, system analysis and international comparative etc. Moreover, the paper conducts comprehensive analytical frameworks including security of supply, sustainable supply and balanced supply, searching the underlying causes of the problems of China’s rare earth products supply. Firstly, the author builds a comprehensive supply evaluation system, and then, analyze empirically. Finally, the paper proposes applicable suggestions to solve the above problems.This paper is divided into seven chapters.Chapter I is the introduction, which describes the research background, significance, research methods and ideas, and discusses the status of international and domestic research, and reviews the existing research literature.Chapter II outlines the basic category and basic theories. It first introduces the brief of rare earth resources and the classification of rare earth products. Then it discusses the basic categories of the rare earth products, its security concern and the balance and sustainability of its supply. This paper argues that China’s rare earth supply should target at three goals: security, sustainability and balance(range by importance). It suggests that the security supply of rare earth products is the core objective, the top priority should be given to the national resource security. Secondly, the sustainable supply is a long-term goal, and the fundamental basis for the Government’s macro-control. Thirdly, balanced supply should be set as the realistic goal and intrinsic motivation of enterprise’s market behavior.Chapter III analyzes the current situation of China’s rare earth supply. In the past, China’s rare earth market was packed with disorderly competition, or even vicious competition. But now, the market is growing monopolistic competition and safety problems emerging: export volumes mismatches with the status quo, lacking of initiative, losing in the WTO dispute, export order out of control, smuggle, export prices deviates from fair value(neither too low nor too expensive). Most issues referring the rare earth products supply focus on the overexploitation, which attract public concerns about its sustainability. The author deems structural surplus in the supply of the China’s rare earth products market as the main cause for the imbalance. Considering homogeneity reinvestment also not rare overseas, there would be gloomy expectations about overcapacity worldwide, including those smelting and separation products of light rare earth or other low value-added products.Chapter IV analyzed the underlying causes of China’s rare earth products supply problems. Based on the globalization of monopoly capital theory, multinational companies entering the Chinese market have had profoundly affect the products, the market structure, the market entry barriers, the economies of scale, and other aspects of market trading platform of the rare earth industry. Low industry concentration is the pivotal reason of the security problems of supply of Chinese rare earth products. Based on property rights theory, missing ownership subject and external problems leads to the unsustainable of rare earth products supply. According to the principal-agent theory, local protectionism and departmental interests caused by the complexity agency relationship between all levels of government raises a wide range of adverse effects on the supply of rare earth products. Prevalence of local protectionism and ingrained of departmental interests are the core reasons about structural surplus of the rare earth products supply.Chapter V built a comprehensive evaluation system including safety supply, sustainable supply and balanced supply, and empirical analysis. When we evaluate empirically with the supply of China’s rare earth minerals, the paper does not use weighted scoring method, but applying the classic Hotelling model.Chapter VI depicts the measurements of rare earth products supply in various countries, and discusses the practices of security supply, sustainable supply and balanced supply made by those countries. Besides the paper studies rare earth products supply strategy, industrial policy and enterprise acts of other country, such as US, Japan, EU, etc.. It should be noted that in other countries, the reserve ratio index of rare earth resources is relatively low, market concentration is high, and capacity utilization is high, products added value of rare earth is relatively high. Those practices provide positive inspiration to solve the Chinese problem.Chapter VII proposes comprehensive countermeasures, to solve the rare earth export imbalances caused by low industrial concentration, and achieve a secured supply. The paper suggests that the government should accelerate the formation of rare earth enterprise groups. In order to solve the over-exploitation issues of rare earth resource and avail the continuous supply, the author recommends that the government should explore the innovative asset management model of rare earth resources and overcome tragedy of the commons and external problems. It also suggests that enterprises should take the lead to fulfill their social responsibility, and apply clean production technology. Considering structural overcapacity caused by local protectionism and departmental interests, the paper advises that breaking the administrative monopoly, strengthening self-discipline, extending the industrial chain of rare earth products, and improving the comprehensive utilization. Those can effectively resolve the overcapacity and achieve balanced supply.The innovative ideas of this paper may be summarized as follows.Firstly, the article uses relative economic theories to analyze Chinese problems. When analyzing the problem of Chinese rare earth products supply, the existing literatures had not yet involve the monopoly capital globalization theory, property rights theory and principal-agent theory. Thus, the analysis of the causes of the problem was not enough. From the perspective of industry concentration, property rights and externalities, local protectionism and departmental interests, the paper analyzes the underlying causes of China’s rare earth products supply issues under the context of globalization, which broadened the applications of monopoly capital globalization theory, property rights theory and principal-agent theory.Secondly, the article builds a comprehensive analytical framework including the index of Security supply, sustainable supply and balanced supply, in order to analyze the underlying causes of China’s rare earth products supply, make a comparative study of international experience, and propose policy recommendations.Meanwhile, applying the empirical analysis, compared to the existing literature that often uses the traditional hierarchical weighted scoring method, this paper expanded the classic optimal exploitation model of non-renewable resources. What is more, the paper uses this model to analysis Chinese rare earth minerals supply. Given above, the article can enrich the empirical research about the optimal exploitation model of non-renewable resources.Thirdly, based on systematic analysis of deep reasons for China’s rare earth product supply problems and with international experiences, the author puts forward some proposals for safety, sustainability and balanced supply of Chinese rare earth products, which’s pertinence and strongly maneuverable. Based on research, the author thinks that China’s rare earth product supply problems are mainly manifested in these areas: exports imbalances caused by low industrial concentration, excessive mining resulting from the rare earth resources property subject existed in name only and structural problem of excess because of local protectionism and departmental interests. Moreover, the author provides systematic suggestions from different perspective covering the country, the industry and enterprises, which may be of strong practical significance and application value.The growing complexity of globalization has strengthened the difficulty for the research, as the author, I realize the results would not be flawless. For example, limited to the difficulty of data collection, the author was forced to partly use surrogate data in the process of empirical research, which may affect the accuracy. Therefore, much work remains to be done. With the era of big data and increasing availability of information, it’s expected that there will be more quantitative researches on the rare earth product supply problems in the future.