Study On China’s Lack Of The Pricing Power Of Rare Earth On International Trade

For years, China’s lack of commodity pricing regulation in international trade has caused tremendous negative impact on China’s economic development. In an ideal international marketing scenario, the prices of any trading commodities are driven by supply and demand. When the demand raises, the prices rise; when the demand falls, the prices also fell. Unfortunately, this is not the case for China’s international trading. When in importing, China pays a market price to buy from foreign importer, just like any other competing exporters would. However, when in exporting, China often has to sell at a lower price than the actual market price. One of the major industries where China taken the most damage due to such practices, is the international trading on REEs, Rare Earth Elements. To have analyze this issue both from a theoretical and empirical point of view is consider very significantly necessary, in order to withdraw a relevant conclusion or even a possible practical solution for our future reference.As one of the most important strategic resources, REEs, rare earth elements, is well-known of their scarcity and ir-replacement. Many scholars also often refer REEs as "vitamins of industry" for its importance in many industries. If people think of Middle-East for its rich reserve in oil, then China is certainly the nation which holds and produces most REEs among all other countries. Reserves of rare earth more than50percent of the world, and accounted for more than90percent of global market share. Nevertheless, due to the fact that China lacks the regulation and control of prices in the international trade market, the prices of rare earth have been fallen each year, yet the demand for export has increased yearly. To reverse this "puzzling" and "bizarre" phenomenon, starting in2005, our government unveiled a series of governance policies in the rare earth industry. These policies did help, but only to a certain extent. As of now, the rare-earth price level did rebound back to the same level as of the1980s, and nowhere close to where its potential price level should be.To full understand this issue of China’s in-ability to regulate its rare-earth exporting field, this article will use many economic theories, such as life cycle on resources, industrial transfer theory, and to build a specific international rare earth trade model on the basis of a general trading model. As the result of such multi-aspect analysis, we can conclude from an economical point of view of the following reasons.1) Lack of demand (domestic consumption) in domestic market, and the overproduction in China’s rare earth industry, caused an excessive surplus in supply. This leads to China’s rare earth industry rely heavily on international export to taken in the excessive surplus.2) Lack of and ineffectiveness of regulation policies of China’s rare earth industry, fields such as industrial quality threshold, industrial centralization, and collective bargaining in international trading, still need to be improved and strengthened in order for China to be more dominant in the rare-earth exporting.