Expert: China Uses 'Demand Chain Power' to Constrain Australia's Mineral Industry

(Central News Agency, Sydney, 10th by reporter Qiu Dezhen) John Coyne, Director of the National Security Research Program at the Australian Strategic Policy Institute (ASPI), stated that while Australia is striving to build supply chain security to maintain national resilience, China is leveraging its 'power of the demand chain' to shape a market environment favorable to itself, thereby constraining the mineral industry that is vital to Australia's economy.

Coyne published an article on the ASPI website yesterday titled 'In minerals purchasing, China is teaching Australia a lesson on economic power.'

The article points out that Australia previously believed its reliance on mineral resources like iron ore could support its national economic power. However, as the Chinese state-owned enterprise 'China Mineral Resources Group (CMRG)' takes control of the country's procurement transactions for imported minerals, China can control the market environment, as well as the flow of profits and investments.

Coyne noted that while Australia focuses on mineral resource extraction and building supply chain security, China is dedicated to controlling demand, financing, processing, manufacturing, standards, and the market. Therefore, compared to countries that only possess resources, China, which holds 'demand chain power,' has greater influence over the mineral market.

Coyne warned that to maintain long-term economic resilience and influence in the trade market, Australia needs to move beyond the cognitive framework of relying on minerals to support its economy and must enhance its understanding of the role of 'demand chain power.'

When a Central News Agency reporter inquired about the 'demand chain power' perspective, Coyne mentioned in an email on the evening of the 9th the recent dispute between China Mineral Resources Group and Australia's FMG Group (Fortescue). Foreign media reported that China Mineral Resources Group attempted to negotiate a transaction contract with FMG but was unsuccessful; subsequently, China Mineral Resources Group issued a statement barring other companies from negotiating with FMG. Coyne believes that if the reports are true, it reflects a larger issue of 'demand chain power.'

Coyne pointed out that the approach of China Mineral Resources Group is to link up various buyers in the market to form bargaining power. This method is similar to how suppliers in the past integrated the bargaining power of producers and exporters. 'In critical mineral markets, influence no longer depends solely on control over supply, but increasingly on the integration of demand.'

Coyne explained that China's influence stems not only from being the largest consumer of many mineral commodities but also from its ability to rally state power, formulate policies, and leverage its status as a major market player to coordinate market demand. 'Once purchasing power is organized and coordinated, it can be transformed into strategic power.'

Coyne further mentioned that although Australian mining industry players have felt the effect of China's 'demand chain power,' the Australian government and academia still lack understanding of it. 'Over the past 10 years, (Australia's) policymakers and academia have invested significant human and material resources in researching supply chain resilience, supply diversification, and critical mineral production. While these are important issues, little attention has been paid to how concentrated demand, coordinated procurement, and organized purchasing determine the market environment and their strategic impact on the market.'

Australia cannot independently counter China's massive 'demand chain power' because its domestic market is relatively small. Coyne believes the pragmatic approach is to strengthen cooperation with allies and partner countries. 'The key question is not whether Australia can match China's market size, but whether it can integrate demand with trusted partner countries.'

Coyne further explained that there are many possible integration methods between Australia and partner countries, including strategic coordination of reserves, unified procurement policies, sharing market intelligence, joint procurement for specific industries, establishing common product certification and standards, and strengthening cooperation between financial institutions supported by partner governments. 'Whoever can organize buyers will be increasingly effective in shaping the market environment. This is an issue that policymakers in the Indo-Pacific region need to pay more attention to.' (Editor: Zhang Zhixuan) 1150610