A Study On The Market Power Of Chinese Rare Earth In The Main Target Exporting Countries

Rare earth is a kind of special resource with excellent physical characteristics, such asmagnetic, optical, superconducting catalysis. This is why it is widely used in the field ofhigh-tech and clean-energy products, and even used to manufacture weapons andaerospace components, so rare earth has its special strategic position. China is the richestcountry in the world’s rare earth reserves, rare earth export volume ranking the first in theworld. However, rare earth exported without any pricing power.This thesis focuses on analyzing the market power in China’s rare earth export market.Goldberg&Knetter (1999) empirical method is used to measure residual demandelasticity values based on different countries, which shares the same value with the marketpower. Here the Partial Least-squares Regression method is used to replace the method ofleast squares. The empirical measure results shows quite different in different countries.The market power value of the Japanese market is only0.06.That in the German market is0.55, the Russian market power value is0.52.In the United States and the Netherlands,that is respectively0.27and0.17. It means that the market power of China’s rare earth inexport market has not yet to be improved, especially in the Japanese market. Marketpower in Japan and other countries is so low mainly due to large-scale illegal mining andsmuggling, as well as unfavorable factors existing in the rare earth industry. Moreover theindustrial policies and fiscal and taxation policies is unreasonable, and the imperfectsystem of Rare Earth Association also lead to the low value of the market power. Finally,to improve this situation some polices are recommended, the government should makesure the rare earth strategic reserves can be truly kept, and strengthen the supervision, thegovernment also should encourage the integration within the industry and the technologyinnovation in the rare earth industry.