Oxford: Oxford University Press, 2024. US$35.00, paper. ISBN 9780197771402.
The rise of China is central to any analysis of the global political economy of the twenty-first century. Views of China in the West have changed significantly since the positive expectations created when China joined the World Trade Organization at the start of the century to one where its increasing economic and technological power is seen as a threat and a challenge to the international order and US hegemony. This has been accompanied by academic debates within international political economy over whether China should be seen as a status quo or revisionist power and in economics over the consequences of Chinese growth for the global economy.
Pascale Massot contributes to these debates through an in-depth study of four commodities: iron ore, potash, uranium, and copper. In contrast to broad generalizations in some of the literature, Massot provides a detailed analysis of China’s impact on the global political economy. The book’s title refers to the paradox that despite the size and growth of the Chinese market, Chinese importers feel vulnerable and have not been able to impose their preferences in terms of the ways in which these commodity markets are organized.
Massot rejects the view of China as a monolithic entity under the control of the Communist Party. She locates her study within a body of literature that regards China as a heterogenous power which emphasizes the relationship between domestic and international dynamics and pays attention to the variety of actors involved in explaining the variation in Chinese actions and outcomes across different areas. She extends this analysis by focusing on differences in outcomes within a specific area, namely the impact of China on the institutional framework of various commodity markets. In contrast to economic analyses of China’s impact on commodity markets which tend to focus on prices and the role it played in the commodity boom, China’s Vulnerability Paradox analyzes changes in market institutions rather than the level of prices.
Central to the book’s argument is the case of iron ore where the shift in the major market from Japan to China was followed by the collapse of the benchmark pricing system and a much greater reliance on the spot market. This is seen as a liberalization of the iron ore market in contrast to the expectation that the growing significance of China as a statist economy would lead to a less liberal system subject to greater central control. The explanation offered here is that China’s market for iron ore was much more fragmented than the Japanese one, so that the shift in market shares meant that instead of three large mining companies (BHP, Rio Tinto, and Vale) on the supply side, setting benchmark prices in negotiation with a small number of Japanese consumers led by Nippon Steel, there was a shift to a situation in which the producers supplied a large number of Chinese users, many of whom preferred to buy on the spot market rather than depend on China’s large steel producers.
Massot develops a general framework of four quadrants for combinations of fragmentation or coordination at the level of suppliers (international market) and consumers (domestic market). These involve two cases of symmetry where both markets are either coordinated or fragmented and two of asymmetry where either coordinated producers meet fragmented consumers or the reverse. Changes in the iron ore market involved a shift from symmetry when Japan was the dominant consumer to asymmetry when China took over. This framework is applied to analyze the potash market where at first sight the situation at the time of China’s emergence seemed similar to iron ore, but where a high level of coordination within China meant that a symmetrical pattern persisted and the benchmark pricing system survived.
The two other cases covered are copper where both internationally and domestically markets were fragmented and this symmetry contributed to the persistence of the spot market and uranium where because of the strategic nature of the product, state involvement and coordination was high in China but where there was low coordination at the international level and benchmarking did not occur.
Massot supports her analysis with a wealth of data drawing on 160 interviews with key informants within the industries, government, consulting firms, think tanks and academia, official statistics from Chinese and international sources, media presentations, and consultancy reports. These show a depth of knowledge of the four commodities studied.
It would be interesting to know how far this approach could be extended to other situations. Although the subtitle of the book refers to global commodity markets, only minerals are included. Would the same framework be relevant to the analysis of other commodities such as hydrocarbons and agricultural products (e.g., soybeans) where China has become the largest importer and depends heavily on imports?
One limitation of the focus on market institutions is that it concentrates attention on one node of the global value chains within which these commodities are governed. Global Value Chain (GVC) analysis and Global Production Networks (GPN) are only mentioned in passing in a footnote. Given the emphasis of these approaches on power and governance which play such a central role in the book, this is a surprising omission. Greater engagement with this literature could have provided useful insights. The binary distinction that is made between the international market/producers and domestic market/consumers does not adequately reflect the circumstances found in several instances. For example, although there were 79 potash processing enterprises in China indicating quite a fragmented domestic industry, two companies controlled the interface with the global market providing a high level of coordination (158). A clearer picture could emerge with an analysis of the entire value chain. In iron ore separate studies are carried out of the iron ore market and iron ore shipping although it is mentioned that the two are closely related. A GVC or GPN analysis could have integrated both these cases in a useful way.
Rhys Jenkins
University of East Anglia, Norwich