State Council circular aims to stop over-exploitation of valuable resources and promote sustainable production

On May 19, the State Council released a document to promote the healthy development of China's rare earth industry.

It contains 22 items that impose stricter policies on mining and waste emission standards, so as to protect valuable rare earth resources and the environment; further complete related laws and regulations to curb illegal mining and smuggling; implement mining and production control; decrease the consumption rate of rare earth reserves; consolidate the industry; phase out inefficient companies with high energy consumption and pollution; promote further innovation to improve mining, separation, smelting and application techniques; and harmonize the rare earth industry with local economies and social development.

The world has been avidly watching China's rare earth policies since 2009, and such policies often make headlines in the foreign media. In March 2009, foreign newspapers accused China of building a rare earth monopoly. But the rare earth market was in the doldrums at that time and it is very clear that other countries were content to purchase rare earth elements from China rather than exploit their own deposits. China has no ambition to establish a monopoly supply of rare earth elements.

But at the same time, the domestic media blamed rare earth enterprises for abusing the valuable resources and polluting the environment.

From 1985 to 1998, rare earth exports were encouraged with a tax rebate policy. As China had a nascent high-tech industry at the time, capital was invested in exploiting natural minerals and rare earth production was one of the key industries for investment.

The scale of China's rare earth mining and export expanded greatly in the 1990s. Besides State-owned companies, there were also many private companies involved in rare earth mining, separation and smelting. State-owned companies were unable to compete. Private companies could offer lower prices, because they paid almost no social insurance and medical insurance and disregarded environmental protection. The output of China's rare earth industry increased remarkably and supply soon surpassed demand. Overseas buyers bargained with different suppliers pushing prices even lower.

A mining and production management policy was launched in 2007. But until 2010, the output of rare earth elements surpassed the approved output of 30,000 to 40,000 metric tons. It implied that China's rare earth industry was out of control, not for lack of laws and regulations, but for lack of supervision from the government, especially local governments.

Considering China's rare earth production capacity is about 200,000 tons - which is almost twice the total global demand - and the disordered state of China's rare earth industry, export quotas are still necessary. At present, China supplies 95 percent of the global demand for rare earth elements.

But China is not the only supplier of rare earth elements. China has about 36 percent of the world's deposits, but there are about 35 other countries with rare earth deposits, distributed in almost every continent.

China has contributed a large but disproportional share in the production of rare earth. This situation must be changed for sustainable development. Otherwise the country's precious rare earth resources, especially those heavy rare earth resources in the south of China, will soon be depleted.

The State Council advisory is aimed at establishing a national strategy for the healthy development of China's rare earth industry and the efficient application of rare earth elements. It will promote the installation of waste processing facilities, so as to improve environmental protection, and implement strict mining and production control in order to protect the valuable rare earth resources.

The author is a researcher of the Chinese Society of Rare Earths.