Op-Ed Contributors

Bigger say in price discovery

By Mei Yuxin (China Daily)
Updated: 2010-05-31 07:50

China must focus its efforts on extracting a higher price for its exports at a time when global inflation is inevitable

China's lack of pricing power in fierce international trade has become the top concern at a time when export expansion is no longer seen as an overriding target in the country's foreign trade strategy.

This phenomenon remains widespread in the field of primary and finished products, ranging from oil, iron ore, nonferrous metals and rare earth minerals to cotton, soybean, clothing and electronic products.

It has by now become routine for the price of a commodity to rise if China intends to buy it, and fall if the country intends to sell.

This has turned into a big obstacle that the country needs to surmount in order to transform itself from a quantity-focused to a quality-focused trade power.

China's disadvantage with regard to its international pricing power is particularly obvious in the field of byproducts and primary products.

Due to the country's accelerated industrialization during the past decades, China has, since the mid-1990s, become a net importer of primary products from its earlier status as a net exporter. The case is the opposite when it comes to finished products.

China's extensive industrial and economic model means its import of primary products as a proportion of its total commodity imports - which mainly consists of inedible material, fossil fuel, lubricants and some raw material - has been on the rise.

It is true that the drastic rise in demand for these products has partly hiked the prices of these commodities. But the underlying factor for the price rise should be attributed to the long-standing loose monetary policies adopted by central banks in some Western countries, especially the US Federal Reserve, since the start of this century.