How can China build purchase alliances in the world market of resource commodities?
| Pages | 121-130 |
| Date | 19 June 2009 |
| DOI | https://doi.org/10.1108/17544400910966095 |
| Published date | 19 June 2009 |
| Author | Yuhua Song,Feng Li |
| Subject Matter | Economics |
How can China
build purchase
alliances?
121
Journal of Chinese Economic and
Foreign Trade Studies
Vol. 2 No. 2, 2009
pp. 121-130
#Emerald Group Publishing Limited
1754-4408
DOI 10.1108/17544400910966095
How can China build purchase
alliances in the world market of
resource commodities?
Yuhua Song and Feng Li
College of Economics, Zhejiang University, Hangzhou,
People’s Republic of China
Abstract
Purpose – The purpose of this paper is to study China’s strategy of purchasing resource
commodities in international markets, what the Chinese government can do to change the cur rent
disorderly import system and how China can build purchase alliances to win in international
bargaining.
Design/methodology/approach – A narrative inquiry is used to analyze China’s strategy of
purchasing resource commodities in international markets, and a game theory model is employed to
study different manufacturers’ attitudes toward united negotiation and purchase alliances and the
influence of government regulation on their attitude.
Findings – The paper finds that the ‘‘paradox of China’s great market’’ in importing resource
commodities is due to the constant increase of China’s demand and China’s disorderly import system.
Government regulation will influence manufacturers’ attitudes toward united negotiation and
purchase alliances. Purchase alliances may be the only effective strategy that can help China avoid
price risk in international markets, because Chinese corporations cannot control foreign mines and
the Chinese futures market cannot mature in a limited, short period.
Research limitations/implications – The analysis in the paper lac ks sufficient theory and
experiences. The game theory model is very simple and is not directly linked with purchase alliances.
Owing to literature constraints, there are few foreign experiences about building purchase alliances.
Practical implications – This paper advises the Chinese government and corporations what to do
about the high import price of resource commodities and how to build purchase alliances to win in
international bargaining, for example improving import regulations, recomposing the united
negotiation group, forming a responsibility system and so on.
Originality/value – The paper forms an integrated agenda for China to build purchase alliances for
importing resource commodities, and most policies could be carried out by the Chinese government
immediately.
Keywords China, Commodity markets, Natural resources, Purchasing groups, Imports,
Emerging markets
Paper type Research paper
1. Introduction
Since the late 1990s, especially after having entered the WTO, China’s economy as well
as international trade have developed at a high speed. With the whole country’s
inflation rate and unemployment rates at very low levels, China’s growth rate of GDP is
around 10 percent and China has accumulated an enormous trade surplu s every year
from 2000 to 2007 (see Table I). Thus, the whole world is paying more and more
attention to the rising of China in recent years. China’s status as the world’s largest
emerging market has been established, and also China has become one of the important
impetuses for world economy g rowth.
The influence of China is primarily mentioned as below: on the one hand, taking
advantage of its abundant labor force and integrated industry chains, China constantly
provides the world with various industrial goods at very low price; on the other hand,
because of the expansion in the domestic production cap acity, China’s import demand
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