China nationalizes rare earth resources

China introduced stringent regulations on rare earth elements, effective from October 1.

SOURCE: DigiTimes

The rules assert state ownership of rare earth resources, prohibiting unauthorized exploitation or damage. They mandate protective mining practices and establish a management framework overseen by key ministries.

According to Xinhua, the South China Morning Post, and Reuters, on June 29, China introduced stringent regulations governing the mining, smelting, and trade of rare earth elements, underscoring their critical role in national security and industrial strategy. Issued by the State Council of China and set to take effect on October 1, these regulations assert that rare earth resources are state-owned, with strict controls aimed at protecting their supply chain.

The regulations, signed by Chinese Premier Li Qiang and consisting of 32 articles, state that rare earth resources belong to the state, prohibiting any organization or individual from encroaching upon or damaging these resources.

China will implement protective mining practices for rare earth resources and enhance the management framework. The regulation assigns responsibilities to relevant departments under the State Council, including the Ministry of Industry and Information Technology and the Ministry of Natural Resources, for rare earth management. It also specifies that local governments at or above the county level are responsible for related rare earth management within their respective regions.

Under the new rules, government oversight will extend to the entire rare earth production process, including mining and refining. A traceability system will be established to track the flow of rare earth products, ensuring transparency and compliance across the industry, which helps enhance domestic oversight and ensure the long-term viability of its rare earth sector, which is vital for driving technological innovation and supporting national economic goals.

Besides, the latest regulation aims to safeguard rare earth resources, promote their sustainable development, and ensure environmental protection and national resource security, as outlined in the document.

China’s dominant position as the world’s leading producer of refined rare earth materials—supplying about 70% globally—has prompted these measures to safeguard strategic resources crucial for high-tech manufacturing and green energy applications.

The move follows previous restrictions on exports of critical metals like germanium and gallium, as well as bans on certain technologies related to rare earth processing and magnet production. These actions are part of China’s broader strategy to assert control over key industries amid geopolitical tensions, particularly with Western countries like the US.

The Chinese regulations may put more pressure on the US to accelerate to secure these resources, which are essential for wide array of applications, ranging from military equipment like F-35 stealth fighters and night-vision goggles to everyday essentials like internet fiber-optic cables and MRI machines.

However, a Business Insider report highlighted concerns over the lack of transparency regarding rare earth mineral stockpiles in the US. This opacity has raised questions among experts about the country’s preparedness to manage potential disruptions in the supply chain. The US Defense Department has identified these minerals as a critical concern due to their indispensable role in military technologies like submarines, aircraft, missiles, and radar systems.

Source: US Geological Survey, Jan 2024