Raw materials in china

This paper examines China’s need for iron, rare earth and waste paper as major raw materials that drive its economy and threaten to affect international trade relations. Iron The history of iron in China dates back to the ancient Chinese dynasties when it was used in the manufacture of weapons. The Zhou Dynasty, however, represents the development of the raw material as a major ingredient of weapons. Between 776BCE and 221BCE, feudal lords made many iron weapons to oust Zhou and led to the widespread smelting and use of iron. Since then, iron artifacts have been extracted and dated back to eighth and seventh centuries BCE. According to Steadman (2012), most computer and electronics makers worldwide manufacture their hardware in China, raising the demand of the raw material.

China holds approximately a third of the world’s minerals including rare earth. Vincent (2018) asserted that China produced up to 90% of the rare earth used in the manufacture of electronics in 2018. This unequal distribution of this critical raw material places China in a dominant position in the manufacture of electronics causing jitters in international trade observers. Vincent, however, argued that there were sufficient deposits of rare earth in other regions including Africa and that China would not control the trade. The paper manufacturers of China have no forests of their own and they rely fully on imported paper pulp for their production. International Trade Theories and China’s Raw Materials Industry Nations trade with others for a variety of reasons. The main reason is that no country is self-sufficient to produce all that it needs for its survival and development (Sen, 2010).

Consequently, nations tend to specialize in their production, producing what they are best suited to produce due to the difference in factor endowments, cost advantage and diversification of markets and sources of raw materials. International trade theories attempt to explain the approach of nations in a trade partnership with other countries. Mercantilism believes that a country should export less than it imports. According to Dibiku (2017), the theory considers trade as a loss to the buyer and a gain to the seller hence it encourages nations to export more than they import to obtain a trade surplus. The rationale of Mercantilism is to generate wealth for the nation to give it an advantage in the economic and political front (Grinols, 2013). The waste paper trade restrictions lend credence to this claim.

China is, therefore, embracing neo-mercantilism in its approach to international trade with regard to the paper industry. The huge population is a source of both skilled and unskilled labor that is necessary for the extraction of raw materials. China’s cheap labor is legendary and it has propelled the country to the enviable position of the “the world’s factory” with many Western companies outsourcing their manufacturing functions to China. It is therefore difficult for any country to compete with China in the production of paper. Nevertheless, its demand for iron and rare earth curb its strong position. China is the oldest civilization in history recognized for the manufacturing. Demand Conditions The presence of a sufficient market for a product drastically shifts the competitive advantage to the firm.

China’s huge population provides a ready market for its iron, rare earth and paper and the country can survive without exporting its production (Chen et al. The population is still growing and the future market is assured. On the other hand, the market for waste paper is not big and China has been the major consumer. China will, therefore, be able to dictate the terms and prices for the purchase of the raw material. The structure of the Chinese economy is a mix of control and free trade leaning towards control. The government hold on economic activities gives China a competitive advantage that locks out competitors at the local market. The rivalry with the Western cannot affect China due to its endowment factors.