A Study On Market Power For Chinese Industry

Chinese industry has obtained rapid development since the1980s, the scale and total of industries have made great achievements, but it is still faced with many problems. From the perspective of industrial development, Chinese industry is still at the low end of global industrial value chain, and has the weak technology innovation ability and competitiveness. From the perspective of industrial organization, there are some serious problems, for example the decentralized market structure, the coexistence of administrative monopoly, economic monopoly and natural monopoly in some industries, a large number of unfair competition cases. The fair competitive environment is threatened. China’s economic development not only faces with the task of promoting industrial transformation and upgrading and improving industry competitiveness, but also prohibiting monopoly and maintaining fair competitive market environment.The market power is the central topic in the field of industrial organization. It can reflect the degree of market competition, but also market performance. So based on the background of Chinese economic transformation, this dissertation uses the study of the market power as the breakthrough point, and focuses on the ownership structure changes, opening to the outside world and actual characteristics of the development of Chinese industry, and analyzes China’s industrial market competition status and market performance. This dissertation follows the historical process of the research on market power, from structural market power of the traditional industrial organization, to behavioral market power of the new empirical industrial organization, then to the international market power of integration of theory of industrial organization and international trade. Firstly, this dissertation analyzes the Chinese industry market structure, and then uses empirical models of new empirical industrial organization to do further investigation on Chinese industry market power, and takes Chinese battery products for example to expand the research on Chinese industry market power from the domestic market to international market. To sum up, there are the following conclusions according to above research. The manufacturing market concentration ration has a transient rise trend during1998-2001, and significantly has a downward trend in the fluctuations after2004in China. The temporary decline of market concentration ration after2004does not change the overall rising trend since the1990s. The market concentration ration of manufacturing in2007is still higher than in1995. The manufacturing market structure shows the characteristics of high decentralization, especially in toy manufacturing industry as a representative of the traditional labor-intensive industries in China. However, the monopoly market structure has formed in the transportation equipment manufacturing industry as a representative of the capital and technology intensive and high proportion of state-owned economy industry. Scale economy doesn’t have a significant positive effect on market concentration. Capital intensity and advertising significantly increases market concentration ration. The expanded market scale reduces the market concentration ration. There is a nonlinear U-shape relationship between private economy and market concentration ration, and is the similar relationship between foreign investment and market concentration ration as well.Chinese industry market power is mainly concentrated in the upstream resource industries including the oil, coal, tobacco dominated by the state-owned economy and so on, and a few downstream competitive industries including the wine manufacturing and so on also have formed higher market power. The upstream administrative monopoly is the typical characteristics of China’s industrial monopoly. The market power of the downstream manufacturing is still low, especially the labor-intensive industries. Private economy, foreign investment and export significantly reduce market power. Import penetration improves market power, but this effect is reversed in the industry of high concentration ration, and the interaction term of import penetration and concentration ration has a significant negative impact on market power. Concentration ration significantly improvs market power, and market power average is greater in the industry of high concentration ration.Chinese battery product has a low international market power on the whole, and only has a high market power in a few countries, the potential market power deviates from the reality market power, because of the competitive behavior of low-pricing between China Battery firms, low international degree of battery brand, and the production costs rise in recent years.Chinese industry policy and competition policy shoulder the dual tasks of promoting the industrial development and keeping a fair competitive environment. The industry policy unduly interferes in the operation of the market with the serious planned economy, and the competition policy system is not perfect, it’s relatively difficult to perform the competition policy, and there are some conflicts between the industrial policy and competition policy. Therefore, we must improve the industry policy and competition policy, and coordinate the relationship between them. We need to guide enterprises with the industry policy to enhance market power through technological innovation, marketing and other market-oriented behavior, and maintain the fair competition market environment by the competition policy. It’s the only way to promote industrial development in China, and it’s also a key to enhance the industrial competitiveness.