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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 72.1 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 72.2 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 72.3 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. doi:10.12783/issn.1544-8053/13/8/72 72.4 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) References [1] D. Hummels, P. J. Klenow, The Variety and Quality of a Nation’s Exports. American Economic Review, 2005, (03), pp.704-723. [2] H. B. Hammouda, S. N. Karingi, A. E. Njuguna, and M. S. Jallab, Growth, Productivity and Diversification in Africa. 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