Research On Export Pricing Power Of The Rare Earth Of China

As an irreplaceable military and strategic resources with high and newtechnology, rare earth has become a focal point for every country, thus it is veryimportant for our future development of economy, military and technology to researchon how to improve our pricing power of rare earth.In the light of this, this paper firstly analyses the reserves and distribution of rareearth as well as its production, which is based on reviewing the related research onpricing power of rare earth in China, and then makes a concrete analysis of its tradedevelopment from three aspects, namely export volume, price and flow direction, wefind the industry of rare earth has distinctive features of oligopoly. At present, as thefirst major nation in mineral reserves and production of rare earth, China plays animportant role in global trade of rare earth with a stronger monopolistic status. Butwith rapid growth of export volume, the market price of rare earth deviates seriouslyfrom its real value, which has taken a significant turn for the better until2006.Everypolicies implemented make the price of rare earth began to spiral up, includingrestricting exploitation, revocating export taxes and charging a tariff in rare earth.Secondly, using for reference to general equilibrium model presented byGoldberg and Knetter(1999),we expatiate on the mechanism of rare earth’s pricingpower, build residual demand function which includes exporting country and itscompetitor, and further research on the effects of residual demand function toexporting price. On these bases, we review present literatures to get pricing gameamong exporting country, importing country and trade media from four aspects ofsupply-demand relationship, market structure, bargaining ability as well as trademedia, thus summarizing the mechanism of rare earth’s pricing power. Theoreticalanalysis shows that the exporting pricing is affected synthetically by the productionand market competition of domestic and foreign enterprises as well as other elementssuch as policies.Thirdly, we build an econometric model which is closely connected withTheoretical analysis, and adopt three mainly products of rare earth which inflows to19countries in2001-2010.We research the effects of their price to market demand ofimporting countries, the production and market competition in domestic and foreignenterprises or between each other, the concentrative degree of domestic export and other management policies. The results show that the export of rare earth is lack ofadvantage in pricing power, its demand-sides always control and affect price, butChina has the capability and potential to improve its pricing power. It also has astronger market status in import, and a great effect on importing price. Besides,improving market concentrative degree and enhancing export quota management areimportant measures to improve our exporting pricing power of rare earth. Finally, therelative policy suggestions were proposed.