Empirical study on Chinese coke export market power

Purpose - The purpose of this paper is to empirically study whether China could achieve strong export market power considering its highly decentralized coke production and trade. Design/methodology/approach - By using time series data, this paper econometrically estimates the coke export market power with the Hall model; then, through analyzing micro trade data and public policy, tries to explain the co-existing dilemma of China's highly decentralized coke production/export and its strong market power in the world market; lastly, by using Stigler's survival technique, it explores the optimum size of China's coke production and export. Findings - The paper finds that the market power of Chinese coke export is quite strong, even if its micro market structure is highly decentralized; the main explanation for the expanding of China's coke export market power comes from its oligopolistic position in the world coke market, its strong industry policy and trade policy restriction. Also it is found that the optimum size in the coke industry should be the market share below 0.5 percent, or in 1-10 percent, while other market sizes are of diseconomies of scale. Practical implications - Such findings provide evidence for China's policy adjustment regarding maintaining strong coke export market power, while eliminating economic distortions and negative production externality. Originality/value - This paper highlights the co-existing issues of micro competitive structure and nationally oligopolistic position in an industry. This study is the first try to combine market power and economies of scale, through empirical analysis and optimum size estimation, to generate implications for optimal government public policy.