I swear every day I take a drive around Suzhou or Shanghai I see at least one new construction project is starting up. If anything’s clear, China’s simply going to need more steel to keep up the pace of building. Typically, though, the biggest buyer has the upper hand in negotiations. Not so in the latest round of iron ore negotiations, in which Australian mining companies found Chinese buyers too annoying to deal with. The Australians said they’ll go on to set benchmark prices for this year’s iron ore with the Japanese, who are shrewd in their own right, and polite, to boot. Meanwhile, Chinese steel producers – of which there are many – need to organize their own thinking about a benchmark price to present to the Australians; and they need to separate politics from international business – difficult to do without a loss of face given the arrest of Rio Tinto employees in Shanghai last summer on spying charges (steel production costs are national secrets).

This particular case makes the point that international companies should not necessarily take at face value what Chinese companies insist on – as opposed to propose. And that Chinese companies have been frozen out of negotiations that have far-reaching global implications indicates the Chinese have not yet fathomed international norms of engagement: the belief that the same sort of bullying tactics that work domestically should be effective internationally has been proven wrong – and will be shown to be wrong again and again as the Chinese try to get international detente right.

The world, it seems, will continue to rule China for some time to come.

Further reading: FT

Steely-eyed