| Since 2016,the price of Chinese raw materials has been on a continued fast rise,but this trend is different from that in the past in that such rise has not caused a sharp rise of ex-factory prices.The immediate intuition is that there is no inflation.Why hasn't the sharp rise in raw material price since 2016 led to the rapid rise in ex-factory prices of industrial products? Is it because the price transmission mechanism from raw materials to finished products in China has changed? The year that marks the 40 th anniversary of Reform and Opening up is a critical time for deepening the reform.Factor market is the lifeblood of the healthy and stable development of the national economy.Analyzing the causes of the changes can help us understand the internal mechanism of price transmission in the industry chain in the new era and provide a reference for the reform of factor market policy.This paper holds the point that the current transmission of raw material prices to finished goods in China is not an accident caused by external objective factors,but an inevitable phenomenon caused by the development of the internal industry.As China is entering the stage of high-processing industrialization,with finer division of labor,more regressive production,and increasing intermediate links,the continuous extension of the industrial chain would provide a shock-absorbing mechanism for the price conduction of raw materials to finished products,which weakens the conduction of raw materials to finished products.To validate this hypothesis,this paper conducts a theoretical analysis of price conduction on the extension of the industrial chain by examining the idea that the key to the formation of the industrial chain is that all enterprises in the industrial chain can reach long-term strategic cooperation and form a community of interests.In the industrial chain,all enterprises are interlinked so that the income of the upstream enterprises becomes one of the costs of downstream enterprises,which affects one another to profit through the conduction of prices.In the distribution of value between industrial chain enterprises,price is the core element which affects each enterprise's semi-finished product pricing through the "price-demand-price" conduction path.In the conduction process,each enterprise will play a dynamic sub-game,in order to maximize its own benefits.Based on this idea,the paper,by describing the equilibrium state achieved by each enterprise in the dynamic game and putting forward a reasonable hypothesis for formula calculation,deduces the theoretical formula of the effect of the extension of the industrial chain on price conduction.From the perspective of price elasticity,using Cobb Douglas' production function and cost-plus pricing principle to derive the degree of reaction of the industry chain's finished product price change rate to raw material price change rate,and then puts forward the proposition that,with the industrialization advancing to the stage of high processing,the industrial chain is getting longer and longer.Moreover,production is divided into more specialized links and the conductive effect of raw materials on the price of finished products will be weakened.In order to verify this proposition,the paper applies dynamic panel data analysis methods,in particular Differential GMM Estimation Method and System GMM Estimation Method using the raw material prices finished product prices and other relevant data obtained from the listed companies.By examining the four dimensions(i.e.horizontal,vertical,finished product price and demand elasticity of raw material prices)one by one,the paper draws the conclusions as follows:From the horizontal dimension,the test chooses five samples of the long-industrial-chain industries,namely industrial machinery,construction machinery and heavy trucks,automobile manufacturing,household appliances,and heavy electrical equipment,and five samples of short-industrial-chain industry,alcohol,food processing and meat,paper products,textiles,and furniture manufacturing,and sets the dumb variables to separate the length of the industrial chain.By comparing the price transmission strength of finished products or raw materials to finished products price elasticity size in different industries,empirical test shows that the price conduction is different as the length of the industrial chain varies,and the long industrial chain has a weaker conductive effect of raw materials on the price of finished products than the short industrial chain.From the perspective of vertical dimension,by setting up time dumb variables,the test verified that with the industry elevating into a high processing stage,from a certain time node,especially after 2010,China's industrialization process evidently reached a turning point,moving into the middle stage of mature industrialization in general.This was largely benefited from more advanced technology.As the Industrial structure in the manufacturing industry is turning to the more complex sectors coupled with higher links of the industrial chain transformation and upgrading,the industrial chain division of labor is becoming more granular,production is being divided into more links and the number of production and processing enterprises is increasing.As a result,the extension of the industrial chain,and the raw materials on the finished product price transmission efforts gradually weakened.No matter from which dimension,the focus of this paper has always been around that fact that under the context of the industrial chain extension,the weakening of transmission force of raw material prices on the price of finished products is a result of the deepening of the high processing degree of industrialization,the granularity of industrial chain division of labor and increased intermediate production links.,Specifically,compared to the short industrial chain,long industrial chain industries show a less remarkable finished products price transmission force.It is clearly seen that,with the acceleration of China's industrialization process,the price elasticity of raw material prices on finished goods is weakened,the raw material cost pressure from the upstream of the industrial chain to the downstream of the industrial chain has been decreasing.From the perspective of the price elasticity of finished goods demand,the research confirmed that the greater the price demand elasticity of finished goods,the weaker the effect of the industrial chain of raw materials on the price transmission of finished products.This is because with large price elasticity of demand for finished goods,a small price change usually leads to large change in demand..In order to ensure sales volume and profits,enterprises will control the formulation of the price of finished products,i.e.the range of price changes,by taking mandatory measures to control the price of finished products.Such action will certainly weaken the impact of raw material prices on the price of finished products,and the transmission effect of raw materials on the price of finished products.The analysis is further complemented by the research from the demand side,making the scope of this paper more comprehensive and the points more convincing.From the perspective of the demand elasticity of raw material prices for finished products,the research uses raw material price change rate and finished product price change rate to carry out the inspection.It is concluded that with the increase in the production and processing links in the industrial chain,the rate of change of the price of finished products on the rate of change in raw material prices is becoming more and more insensitive.In other words,the elasticity of the price of finished goods to the price of raw materials gradually weakens with the extension of the industrial chain.To sum up,dimension analysis,or differential GMM estimation method or system GMM estimation method,all end up with the same conclusions: 1,long industrial chain raw material price's effect to the price of finished products is significantly weaker than that in the short industrial chain;2,with the promotion of industrialization to a high degree of processing stage,the industrial chain is extended,production is divided into more specialized links,and raw materials' effect on the price of finished products will weaken the transmission force.These conclusions all confirm the proposition that the price conduction of raw materials for finished products in the long industrial chain is weaker than that in the short industrial chain.In order to make the test more reasonable and rigorous,this paper also makes a further judgment on the rationality of the long and short industrial chain division.According to the proposition of this paper,the same differential GMM estimation method and system GMM estimation method are also used to test.The results show that in the selected industries in the short industry chain raw materials have a greater impact on the finished products,indicating that the industry selection in the long and short industrial chain in this paper is reasonable.Put it differently,in the five major industries of the industrial chain,namely industrial machinery,construction machinery and heavy trucks,automobile manufacturing,household appliances and electrical equipment,the price transmission force of raw materials to the finished product is weak;Guided by the above conclusions,this paper puts forward reasonable policy proposals in the light of the current national situations,that is,to increase the reform of factor marketization,but not to leap forward,directly into the marketization.The paper suggests promoting the effective role of the invisible hand in the factor market,establishing a safety net,and distributing financial expenditure rationally,under the guidance of the government.Besides,to reverse the distortion of factor market,we must make greater efforts on the institutional arrangement,and at the same time carry out the reform of land system,household registration system and interest rate marketization. |
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