ABSTRACT
The motives for, and cost of, China's intervention are important questions this chapter sets out to answer. In 2006, the Ministry of Commerce (MOFCOM) and the National Development and Reform Commission (NDRC) released a statement signaling that state intervention was imminent: Chinese steel and iron enterprises are facing many problems so China cannot accept another price rise asymmetry in the distribution of the transport cost differential is to be expected due to the increased risk and cost accruing to the importers, which are obliged to organize and manage the seaborne freight of the iron ore shipments. The increasing value of Australia's transport cost advantage to Asia led BHP Billiton negotiators to put forward a proposal to reformulate the freight sharing component of the Asian price mechanism during the 2005 benchmark negotiations. At the operational level, the Chinese state has increased state-owned enterprise (SOE) autonomy and implemented incentives to support managers to maximize profits.
