How can China build purchase alliances in the world market of resource commodities?

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 current 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 lacks 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.

Citation

Song, Y. and Li, F. (2009), "How can China build purchase alliances in the world market of resource commodities?", Journal of Chinese Economic and Foreign Trade Studies, Vol. 2 No. 2, pp. 121-130. https://doi.org/10.1108/17544400910966095