China's Scarce Mineral Resources Trade Policy Shall Follow the Pace of the Times



China's Scarce Mineral Resources Trade Policy Shall Follow the Pace of the Times

In the past two years, due to weak global economic recovery and manufacturing downturn, the world mineral market continued to slump. As a result, scarce minerals have also been seriously affected. On one hand, the downstream industry demand is weak. Europe, the United States, Japan and other major consuming countries saw a significantly reduced demand growth, while emerging countries were facing structural adjustment; on the other hand, the new capacity of global scarce mineral industry’s initial investment was gradually released, helping market supply and demand to turn from Demand Exceeding Supply to Supply Exceeding Demand; also coupled with the effects of stronger dollar and overall decline in oil and other commodity prices, scarce mineral prices generally grew lower. Among them, the price of rare earth metals fell by 40% in 2014, further down by 28% in 2015, and tungsten, antimony, tin prices also fell to the bottom. Meanwhile, the domestic market was also facing shrinking demands, overcapacity, rising costs and other severe challenges. The soaring scarce mineral prices in 2011 led to a new batch of new production lines launched everywhere and doubled capacity. Despite the fact that state control measures were implemented in the upstream mining areas, illegal mining was still repeatedly seen due to incomplete regulations and supervision. Raw materials from private mining flooded the market, exacerbating the situation of excess supply in the market. On the other hand, the Government has enhanced environmental remediation efforts in recent years, and actively practiced Green Development, which led to rising corporate environmental management costs and labor and land costs. That brought huge pressure to the development of mining enterprises, some of which even fell into a long-term loss. So in the long run, such rising of environment and factor costs is very likely to become a trend.

Looking at the development and implementation effect of China’s scarce mineral trade policies in the past 30 years, the policies brought out in each period in China served to address the outstanding issues in economic and trade activities. They were very practical, but lacking in far-sighted consideration over the entire industry and market development. They were highly subjective, thus lacked the respect for the environment, including the economic environment, market environment, resource environment and natural environment, and ignored the role of trading partners in economic activities.

In today's world, economic globalization and trade liberalization have become an irreversible trend, where we can no longer take unilateral control measures to control trade development. The fundamental way to improve the terms of trade shall be using technological progress to promote domestic industrial transformation and upgrading, to drive the changes in export trade structure, and by increasing the industrial concentration, and forming large enterprise groups to enhance our bargaining power in the international market. In the present, especially when the global mineral products market demand is sluggish with production and supply surplus, and in the new situation of strengthened resource environment constraints and rising costs, we shall be more committed to the domestic industry supply side structural reform and the control over scarce mineral resources from production source. To this end, the following countermeasures are proposed:

Take strict control over the access threshold in the upper reaches mining sector, strengthen regulatory responsibilities of departments and licensing management, take strict control of unreasonable exploitation, shut down and rectify those enterprises failing to meet national standards and eliminate backward production capacity. Meanwhile, actively utilize the resource tax, environmental tax and other regulatory means stipulated in WTO rules, suppress the mining investment impulse by increasing the tax rate and costs and control the blind expansion of scarce mineral production.

Speed up the industrial integration of the scarce mineral processing sector, improve industrial concentration, form large enterprise groups, in order to improve the situation of separated smelting and extraction of scarce minerals and scattered businesses and small range. Guide the industry towards intensive processing and support the development of large-scale high-grade scarce mineral export processing enterprises focusing on high value-added products and boost the transformation and upgrading of enterprises.

Strengthen customs supervision and regulate export order, and especially in the context of further liberalization of scarce minerals market, supervise smuggling and other illegal acts of export, and set up a scarce metal industry seller consortium within a short time, establish a scarce mineral export price negotiation mechanism to avoid low-cost competition among enterprises.

Enhance research and investment in basic and production areas of scarce minerals, especially in technology. The state shall encourage technological innovation and product innovation through fiscal, tax means or by establishing special funds, encourage foreign cooperation in the field of technological innovation, while conducting dynamic monitoring on scarce mineral resources and the environment in order to ensure industrial sustainability.

Improve laws and regulations, strengthen resource property rights system, develop Scarce Mineral Resources Protection Law to consolidate the protection of scarce minerals through legal means, and to ensure severe punishment on unauthorized mining, violation of laws and discipline, as well as inadequate government regulation.

In short, the trade policy in new era shall be more open, stable, transparent, standardized, and shall be the one to guarantee the soundness and sustainability of our scarce minerals industry. In the framework of multilateral trade rules, we shall correctly handle the relationship between current and long-term interests, local and central interests, and the interests of both China and foreign countries. In an increasingly competitive international environment, we shall perceive market development in a more objective and sensible manner in order to make wise choices.