According to Situation and Policies of China's Rare Earth Industry, China currently fulfills over 90% of the global market rare earth needs with 23% of the world's total reserves, which its output of permanent-magnet, luminescent, hydrogen-storage and polishing materials, which use rare earths as raw materials, accounts for more than 70% of the world's total, and China-produced rare earth materials, parts and components, as well as rare earth end products.

Since the introduction of the country’s reform and opening-up policies in the late 1970s, China's rare earth industry has seen rapid development. The country can now produce over 400 varieties of rare earth products in more than 1,000 specifications. In 2011, China produced 96,900 tonnes of rare earth smelting separation products, accounting for more than 90 percent of the world's total output.

In recent years, investment in China's rare earth industry has experienced rapid growth and an R&D system has been put in place for the development of rare earth mining and dressing, smelting and separating. Industrialization has been achieved in using rare earths to produce permanent-magnet, luminescent, hydrogen-storage, and catalytic materials.

Reduced supply

However, after more than 50 years of excessive mining, China's rare earth reserves have kept declining and the years of guaranteed rare earth supply have been reducing. There has also been severe damage to the ecological environment due to outdated production processes and techniques in the mining, dressing, smelting and separating of rare earth ores.

China's rare earth industry has huge over-capacity in smelting and separating, while the research and development of rare earth materials and components is lagging behind, the white paper says. China's rare earth metals industry, relatively small in scale, features a low concentration rate with numerous businesses, but lacks large enterprises with core competitiveness.

There has also been a severe divergence between price and value, with the price of rare earth products remaining low and failing to reflect their value and the scarcity of the resources not being appropriately represented.

To address these problems, the Chinese state council has issued guidelines on promoting the sustainable and healthy development of the rare earth industry attaching more importance to the protection of resources and the environment, and the realization of sustainable development. According to the guidelines, the government will strengthen control over the mining, production, circulation, import and export, and other links of the rare earth industry, and study and formulate as well as amend and improve related laws and regulations on the administration of this industry. In April 2012, an Association of China Rare Earth Industry was founded with official approval. It is expected to play an important role in promoting self-discipline in the industry, regulating the industrial order, and carrying out international cooperation and exchanges, among other functions.
The state plans to establish a more regulated system of rare earth resource exploitation, smelting and separating, and market circulation and increase the recycling rate of rare earth resources and the recycling rate of ore dressing recovery. It will also make sure the discharge of waste water and gas and slag meet the established standards.

International reserves

Despite these additional controls, the Chinese government says that China will continue its rare earth supply to the international market. According to the white paper, the country hopes that countries and regions with abundant rare earth reserves will make active efforts in developing their own resources to diversify the supply and expand rare earth trade in the international market, shouldering together the responsibility of global rare earth supply in order to meet the needs of the sustainable development of the world economy.