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Study on the Relationship Between Concentration Ratio of Molybdenum Resources and Export Growth
Qiong Wu1, Caiwu Lu1, Qinghua Gu1*
1. School of Management, Xi’an University of Architecture and Technology, Shaanxi, China
Abstract: The irrational structure and weak competitiveness of molybdenum products is a protruding problem adversely affecting the
sustained development. In order to reflect the status of molybdenum products and analyze the structure of the appropriate supplement, this
paper classified the products into Pri-intermediate products and deep processing products based on the 231 data analysis from 11 kinds of
export products since 1995 to 2015 in China. It applies the Cini-Hirschman coefficient to calculate concentration ratio of molybdenum
products exportation in China, and using co integration theory and Granger causality test to analyzed the relationship between the
Pri-intermediate products, the deep processed products and the concentration ratio of molybdenum products exportation. This research
shows that the positive influence coefficient of the Pri-intermediate products on total concentration ratio is greater than the deep processing
products. Additionally, the relationship between concentration ratio of molybdenum products exportation and export growth are also
analyzed by using VEC error correction model. The empirical results show that Chinese molybdenum products exportation is experiencing a
transitional period of diversified products. It need to further promote the diversification strategy and improve the level of deep processing
products to get more stably and continuously of export growth.
Keywords: Pri-intermediate products; deep processing products; Export growth; Concentration ratio
1. Introduction
The structure of export products is an important indicator in measuring the competitiveness of a country's products in foreign trade. It
not only reflects the position of a country in the global division of labor, but also shows the added value of the trading products. The
optimization path of the structure of export products is generally divided into three parts: primary products, intermediate products, deep
processing products. In general, when the proportion of deep processing products in the total export products is ascending, It shows that a
country's product structure has been optimized; on the contrary, it shows that the structure of export products has been aggravated.
China is one of the largest producer and consumer of molybdenum resources in the world. Analysis of the output for the world's major
producers in 2015 can be seen that China's molybdenum output is about the 37.8% of total world molybdenum production[1].The
self-sufficiency rate of molybdenum resources strongly supports the rapid economic development, It is an important source of local revenue
to solve the problem of employment and enliven regional economy. But undeniably, resource supply under the traditional planned economy
system is not fully adapted to the requirements of market economy and economic globalization. In the last few years,China has carried out
the blind investment and massive mining in molybdenum resources, It is not only posed a serious threat to the mine production, but also lead
to the problem of excess production capacity. From table 1, it can be observed that the new stock of molybdenum resources in 2015 has
exceed the value in 2014 more than three times. The evidence from China is that today's lack of demand and excess production capacity
creates a decrease in net export capacity. China exported 9669 tons of molybdenum products in 2015, The quantity dropped by 35.3 percent
than the previous year and net exports fell to 1182 tons. In the Pri-intermediate products, Molybdenum Oxide of China amounts to 930 tons
in 2015 and decreases 77.7%, accounting for less than 9.6% of total export; Molybdenum concentrate of China amounts to 1144 tons in
2015 and decreases 25.8%, accounting for around 11.8% of total export; In the deep processing products, Molybdenum bars, rods and
profile shapes of China amounts to 1798 tons in 2015 and decreases 54.4%, accounting for around 18.6% of total export. From the current
situation of export structure and variation situation of international competitiveness, Export growth is not only affected by the impact of a
sharp decline in the global molybdenum price, but also restricted by the structure of export products. China's exports of molybdenum
products are mainly Pri-intermediate products, it relied on import deep processing products with high technical content and high
value-added. The irrational structure and weak competitiveness of molybdenum products is a protruding problem adversely affecting the
sustained development, Therefore, it is particularly important to study the impact of the structure on export growth.
Table 1 Supply and demand situation of molybdenum resources in China during 2010-2015(Unit: ton)
Year
2010
2011
2012
Supply quantity
74400
80812
84000
Import quantity
17202
9496
6398
Export quantity
19523
17104
13420
Consumption quantity
60000
69927
72000
quantity
New stock
12079
3277
4978
Data source: China Customs, China Non-Ferrous Metals Industry Association.
2013
80129
8744
9652
74000
2014
87321
9389
14592
75000
2015
84402
8487
9669
60000
5221
7118
23220
With the product structure as the starting point, This paper explores concentration ratio of molybdenum resources based on the 231 data
analysis from 11 kinds of export products about molybdenum resources since 1995 to 2015 in China, and on this basis, using ADF test,co
integration theory and Granger causality test to analyzed the relationship between concentration ratio of molybdenum resources and export
growth. The rest of this paper is organized as follows: Chapter 2 introduces the background and the development condition of the product
structure; Chapter 3 is establish and analysis of the model; Chapter 4 is part of the empirical analysis, Chapter 5 is the further analysis of the
empirical results, Chapter 6 is Conclusion.
2. Literature Review
In order to reflect the status of diversified products and analyze the structure of the appropriate supplement, Quite a number of research
studies focus on the concentration ratio of molybdenum products exportation to measure the product structure. The study of specialization
and diversification caused by concentration ratio has been widely discussed since 1960s. In the existing literature, The research on
concentration ratio is mainly focused on two aspects: The first aspect is that diversified products can promote the stable export growth, The
second aspect is that specialized products can promote the stable export growth.
D.Hummels and P. J. Klenow [1] made a comparison between the developed and developing countries, The study suggests that export
growth of developing countries comes from diversified products, and continue to reduce concentration ratio; export growth of developed
countries comes from specialized products, and continue to increase concentration ratio. On the one hand,, There are plenty of literatures
Journal of Residuals Science & Technology, Vol. 13, No. 8, 2016
© 2016 DEStech Publications, Inc.
doi:10.12783/issn.1544-8053/13/8/72
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discussed that diversified products in developing countries can promote the stable export growth. H. B. Hammouda, S.N.Karingi, etc. [2]
shows that diversification can help developing countries overcome the negative impact, which is caused by export instability and
deteriorating terms of trade. A. A. Reddy [3] presents a literature review on Agricultural productivity growth, Research indicates that
significant income gains are possible through crop diversification from paddy to pulses, oilseeds and HVCs in upland rain fed areas. These
studies have demonstrated a negative correlation between concentration ratio and export growth.In addition, some researches in China also
have demonstrated the negative correlation, this scholars such as Y. J. Liu [4],P. Y. Xu and R. Chen [5],L. Zuo and Y. Tao [6].For example, Y.
J.Liu use the Cini-Hirschman coefficient and comparative advantage theory to calculate concentration ratio. this research has pointed out
diversification is conducive to the stability of exports. On the other hand, there is also a large number of literatures discussed that specialized
products in developed countries can promote the stable export growth. A. L. Webster [7] employs a varying-parameters model to study the
relationship between industrial concentration and profitability. The results show that while market concentration is associated with profit, the
nature of the relationship varies with the prevailing scale economies. M. Gisser and R.D. Sauer [8] construct a equilibrium model of
monopoly industry, The regression result support the concentration of the increase will improve the profit margins.
In recent years, Some scholars have different views and opinions. they believe that the specialization in the developing countries can
promote economic growth and export stability. Y. C. Qiang and X. L. Gong [9] laid special stress on analysing the inherent principles of the
concentration ratio and the fluctuation of export. The analysis shows that the relationship between export fluctuation and the concentration
ratio is consistent in the stage. J. Shao and J. Liu [10] makes an empirical study on the relationship between export specialization and
regional economic growth through employing data covering 222 prefectural cities. The result reveals a positive relationship. that is, more
specialized export structure is beneficial to regional growth. S. Ju and J. B. Wang [11] use China's export data for 19 years to calculate the
concentration ratio from absolute and relative angles, the conclusion is that the concentration ratio of the export commodities is mainly
influenced by the scale economic effect .Q. J. Zhang [12] use the error correction model to analyze the unstable factors of China's export
growth, the analysis shows that the concentration ratio is positively related to the growth of China's export. Based on the above research, this
paper takes the specific data of 1995 to 2015 as the research object, and analyzes the influence of the concentration ratio of molybdenum
resources on the export growth.
3. Establish and analysis of the model
3.1 Calculation of the concentration ratio
Concentration ratio refers to the extent that a country's export products are concentrated in a variety of products, which reflects the
diversification of the country's export products. There are many indicators to measure the concentration ratio, Cini-Hirschman coefficient is
the most commonly used in the current literature, This coefficient is a measure of statistical dispersion developed by the Italian statistician C.
Gini [13-14]. Although its application needs a large amount of calculation, but it can comprehensively reflect the proportion of total exports
accounted. The formula is shown as (1).
2
 X it  (1)


∑
i =1  X t 
Here, Gt represents the coefficient in the t period, X it is the export value of product i in the t period, X t is total exports in the
t period.
The research data is selected from 11 kinds of export products since 1995 to 2015 in China. According to the present situation of
molybdenum resources, the research data are divided into two categories: Pri-intermediate products and deep processing products. The first
category of Pri-intermediate products include Roasted molybdenum ores and concentrates (HS code: 26131000), Other molybdenum ores
and concentrates (HS code:26139000), Ferro-Molybdenum(HS code: 72027000),Ammonium molybdate (HS code: 28417010),Other
molybdate (HS code: 28417090), Molybdenum oxide and hydroxide (HS code:28257000). The second category of deep processing products
include Molybdenum wire (HS code:81209600),Molybdenum bars, rods and profile shapes (HS code:81029500), Molybdenum unwrought
(HS code:81029400),Molybdenum powder(HS code:81021000),Other molybdenum products(HS code:81029900). This export data are
substituted into the formula(1).Then, the trend of concentration is shown in Figure 1.
Gt =
n
Figure 1 The trend of concentration ratio in China (1995-2005)
The research data is selected from 11 kinds of export products since 1995 to 2015 in China. According to the present situation of
molybdenum resources, the research data are divided into two categories: Pri-intermediate products and deep processing products. The first
category of Pri-intermediate products include Roasted molybdenum ores and concentrates (HS code:26131000),Other molybdenum ores and
concentrates(HS code:26139000), Ferro-Molybdenum(HS code:72027000),Ammonium molybdate (HS code:28417010),Other molybdate
(HS code: 28417090), Molybdenum oxide and hydroxide (HS code:28257000). The second category of deep processing products include
Molybdenum wire (HS code:81209600),Molybdenum bars, rods and profile shapes (HS code:81029500), Molybdenum unwrought (HS
code:81029400),Molybdenum powder(HS code:81021000),Other molybdenum products(HS code:81029900). This export data are
substituted into the formula(1).Then, the trend of concentration is shown in Figure 1.
3.2 Analysis the paths of concentration ratio
Concentration ratio has a positive correlation with the degree of specialization, Therefore, A country should focus on specialized
Journal of Residuals Science & Technology, Vol. 13, No. 8, 2016
© 2016 DEStech Publications, Inc.
doi:10.12783/issn.1544-8053/13/8/72
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products from the perspective of comparative advantage theory by using the strategy of export comparative advantage products and import
comparative disadvantage products. Specialized production can reduce costs and enhance the scale, thereby to promote the growth of export
products. But it is worth noting that if a country use the strategy of specialized products for a long time, it will easily fall into the trap of
“comparative advantage theory”[15].Many companies in China always produce and provide the Pri-intermediate products to the importer,
As an example, Roasted molybdenum ores and concentrates. The added value and technical content of this product is relatively lower,
although it can be profitable in short-term, but is not conducive to the stability of the trade in the long term. Therefore, the concentration
ratio should be more concentrated in the deep processing products after the economic development to a certain extent, such as Molybdenum
wire, bars, unwrought, etc. In this paper, the influence path of concentration ratio on the export growth is shown in figure 2.
Figure 2 The influence path of concentration ratio on the export growth
Through the analysis of concentration ratio in Figure 1 and the influence path in Figure 2, It can be known that the total concentration
ratio of molybdenum resources has been high throughout the period of 1995-2010, Experienced a slight decline and rise for three times, the
total concentration ratio has hovered in the 0.532 to 0.690. From 2010 to 2015, The total concentration ratio have declined rapidly, down
31%. The trend for concentration ratio of Pri-intermediate products is basically consistent with the total concentration ratio,and shows a
decrease tendency; The trend for concentration ratio of deep processing products is shows a increase tendency.
4. Empirical analysis
4.1 The concentration ratio for different products
This paper takes export data of molybdenum resources as the research object to calculate the concentration ratio by using the
Cini-Hirschman coefficient. In order to analyze the influence of Pri-intermediate products and the deep processing products on the total
concentration ratio. The calculation steps are as follows:
(1)Unit Root Test
The preconditions for the estimation and testing of the concentration ratio is that each variable must have a stable characteristic,
otherwise, it is easy to produce spurious regression. So, It is necessary to test the stability of the unit root, if it is not stable, it will use the co
integration test to analyze the relationship between variables.
int: Total concentration ratio;
int1: Concentration ratio of Pri-intermediate products;
int2: Concentration ratio of deep processing products.
Table 2 The Results of ADF test
Variable Name
ADF
Critical Value(1%)
Critical Value(5%)
Critical Value(10%)
P
int
0.077406
-3.808546
-3.020686
-2.650413
0.9554
int1
0.953628
-3.808546
-3.020686
-2.650413
0.9941
int2
-0.101299
-3.808546
-3.020686
-2.650413
0.9367
D(int)
-4.828181
-3.831511
-3.029970
-2.655194
0.0013
D(int1)
-4.073052
-3.831511
-3.029970
-2.655194
0.0060
D(int2)
-4.336597
-3.831511
-3.029970
-2.655194
0.0035
Table 2 indicates the data of int, int1 and int2 is not stable but the first difference is stationary, it is integrated of order one. Johansen
cointegration test can be used for the next step.
(2)Co integration Test
The results of Johansen co integration test are shown in Table 3. Base on the original hypothesis of “no co integration relationship”,
The value of the trace statistic is 79.74229, which is greater than the critical value 35.19275 and the probability is 0, The conclusion is that
the original hypothesis is rejected. For the original hypothesis of “at most a co integration relationship”, The value of the trace statistic is
26.07081, which is less than the critical value 20.26184 and the probability is 0.0070, So, there exists at least two co integration
relationships. For the original hypothesis of “at most two co integration relationships”, The value of the trace statistic is 4.242637, which is
less than the critical value 9.164546 and the probability is 0.3772. It can accept the original hypothesis, there exists two co integration
relationships. Similarly, the judgment result of Maximal Eigenvalue Statistic is consistent with the trace statistics. After standardized co
integration relationship, the formula is obtained as follows:
int = 1.656806 * int 1 + 0.781594 * int 2 + 0.447788 (2)
In the long run, Concentration ratio of Pri-intermediate products is positively related to the total concentration ratio. Similarly,
Concentration ratio of deep processing products is positively related to the total concentration ratio. The concentration ratio of
Pri-intermediate products increased by 1%, the total concentration ratio will increased by 1.656806%;The concentration ratio of deep
processing products increased by 1%, the total concentration ratio will increased by 0.781594%.
Journal of Residuals Science & Technology, Vol. 13, No. 8, 2016
© 2016 DEStech Publications, Inc.
doi:10.12783/issn.1544-8053/13/8/72
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Table 3 The Results of Co integration Test
H0
eigenvalue
Trace Statistic
Critical Value(5%)
Prob
None*
0.957453
79.74229
35.19275
0.0000
At most1
0.723075
26.07081
20.26184
0.0070
At most2
0.220862
4.242637
9.164546
0.3772
(3)Granger Causality Test
Under the conditions of “int1 does not Granger Cause int”, Probability 0.0316 is less than the confidence level 0.05, That is, int1 is the
Granger reason of int; Under the conditions of “int2 does not Granger Cause int”, Probability 0.0365 is less than the confidence level
0.05,That is, int2 is the Granger reason of int. However, Under the conditions of “int does not Granger Cause int1” and “int does not
Granger Cause int2”, Test results is to accept the original hypothesis.
4.2 The relationship between total concentration ratio and export growth
This paper takes export data of molybdenum resources as the research object to calculate the concentration ratio by using the
Cini-Hirschman coefficient. In order to analyze the influence of Pri-intermediate products and the deep processing products on the total
concentration ratio. The calculation steps are as follows:
The relationship between total concentration ratio and export growth
Through these studies can be found, Concentration ratio of Pri-intermediate products and Pri-intermediate products are the Granger
reason of total concentration ratio. There was a positive correlation between this two concentrations and the total concentration ratio. So, it is
very important to analyze the influence of total concentration ratios on the export growth. The calculation steps are as follows:
(1)Unit Root Test
int: Total concentration ratio;
exp: Export data after the logarithm.
Table 4 The Results of ADF test
Variable Name
exp
int
D(exp)
D(int)
ADF
-1.741116
0.077406
-4.971488
-4.828181
Critical Value(1%)
-3.808546
-3.808546
-3.931511
-3.831511
Critical Value(5%)
-3.020686
-3.020686
-3.029970
-3.029970
Critical Value(10%)
-2.650413
-2.650413
-2.655194
-2.655194
P
0.3968
0.9554
0.0009
0.0013
Table 4 indicates the data of int, exp are not stable but the first difference is stationary, it is integrated of order one. Johansen
cointegration test can be used for the next step.
(2)Co integration Test
Table 5 The Results of Co integration Test
H0
None*
At most1
eigenvalue
0.865265
0.429781
Trace Statistic
41.05890
8.897750
Critical Value(5%)
25.87211
12.51798
Prob
0.0003
0.1811
From the above table 5 it can be seen that there is a co integration relationship between the two variables. the error correction term ecm
of the two variables is obtained as follows:
(3)
ecm = exp− 9.314109 * int − 0.297422 * @ trend
Then this paper does the unit root test on ecm,It can be verified that the confidence level is stable. Total concentration ratio is positively
related to the export growth.The total concentration ratio increased by 1%, the export growth will increased by 9.314109%
(3)Modeling results of VEC model
Co integration relation expression in VEC model is similar with co integration relation type in Johansen co integration test, It is only
added a constant term, which leads to a slight difference in coefficient estimates. The constant term C is equal to -1.930968. the coefficient
vector can be obtained base on the model VEC, and the two equation of the model is not the original sequence, it is the difference sequence
of the original sequence(referred to by the letter D). The VEC model can be written as follows:
0.29
0.19 
− 0.45
− 0.32 0.77
∆Yt −1 = 
CointEqt −1 + − 0.06 − 0.05 − 0.01 − 0.02 ∆Yt −1...... + ∆Yt − 4 + ε t
− 0.03


;
 D(exp)
∆Y = 

 D(int ) 
(4)
As seen form the meaning of coefficient CointEq1 in the error correction term, when the value of int keeps unchanged, the coefficient
-0.45 indicates that the change of exp in period t can eliminate the non balance error 0.45 of the previous period. when the value of exp
keeps unchanged, the coefficient -0.03 indicates that the change of exp in period t can eliminate the non balance error 0.03 of the previous
period.
5 The further analysis of the empirical results
Through the above analysis of the concentration ratio of molybdenum resources, During period in the low level of molybdenum
resources development, The export growth is mainly dependent on the Pri-intermediate products for export, By enhancing the level of
concentration ratio of Pri-intermediate products, the scale effects and export growth can be promoted(The control period of Pri-intermediate
products).When the trade condition gradually deterioration, the scale effects may lead to the imbalance between supply and demand,
Therefore, the exports and the total concentration ratio began to decline, so the product structure will gradually change to the deep
processing products(The transition period of diversified products).During period in the high level of molybdenum resources development,
The export growth is mainly dependent on the export trade of deep processing products, By enhancing the concentration ratio of deep
processing products, the country can obtain high added value, in order to increase the data of export growth(The control period of deep
Journal of Residuals Science & Technology, Vol. 13, No. 8, 2016
© 2016 DEStech Publications, Inc.
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processing products). as shown in Figure 3.
Figure 3 Three periods of export growth
China's export of molybdenum resources is in the transition period of diversified products. In this period, The export of
Pri-intermediate products are inhibited, it have a serious problem of overcapacity. It showed a decrease in total concentration ratio
(Concentration ratio of Pri-intermediate products is reduced, and the concentration ratio of deep processing products is promoted), and the
total exports have slumped. Under this background, There are two possibilities for the improvement of concentration ratio of deep
processing products, The first possibility is that the enterprises optimize the product structure, and gradually change the structure to the deep
processing products. The second possibility is that the export of Pri-intermediate products has suffered defeats frequently and the deep
processing products was slightly affected.
In recent years, from the situation of China's export, deep processing products exports amounted to 147 million dollars in 2015 and
decreases 33%, Pri-intermediate products exports amounted to 97 million dollars in 2015 and decreases 61%. It is not difficult to see that the
improvement of the concentration ratio of deep processing products is mainly caused by the sharp drop of concentration ratio of
Pri-intermediate products. Therefore, We should optimize the product structure on the basis of continuous improvement of technical level,
promoting the diversification strategy of export products and improve the level of deep processing products to get more stably and
continuously of export growth.
6. Conclusion
Based on the analysis of China's export of molybdenum resources in the current situation, this paper uses Cini-Hirschman coefficient to
calculate the concentration ratio since 1995 to 2015 in China, The results showed that the concentration ratio of Pri-intermediate products
increased by 1%, the total concentration ratio will increased by 1.656806%;The concentration ratio of deep processing products increased by
1%, the total concentration ratio will increased by 0.781594%. In the study of the relationship between the concentration ratio and the export
growth, The total concentration ratio increased by 1%, the export growth will increased by 9.314109%.
Under the background of a sharp decline in the price and excess production capacity, A major reason for the impact of the export
growth is the decline in the total concentration ratio. There was a positive correlation between this two variables. The rise of concentration
ratio of deep processing products is the "illusion" for the product transformation, the fundamental reason is the export inhibition of
Pri-intermediate products. Therefore, In the current market economy conditions, on the one hand it need to accelerate the implementation of
diversification strategy in order to ease the situation, on the other hand, it need to constantly increase the deep processing products to
improve trade conditions.
Acknowledgements
The authors gratefully acknowledge that Luoyang Luanchuan Molybdenum Industry Group. Inc. This project is also financially
supported by the Social Science Foundation of Shaanxi Province, China.(Grant: 2016R014)
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Journal of Residuals Science & Technology, Vol. 13, No. 8, 2016
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