Rare Earth Regulation Shifts From Decentralized Planning to Centralized Control

By:

Age: 20 hours

China Rare Earth Group Engineers Conducting Field Exploration (Source: China Rare Earth Group)

Executive Summary:

  • Beijing has shifted its rare earth management model to a “total volume control” system, in which annual production caps are set centrally and allocated directly to enterprises. This reflects tighter centralization and a new focus on controlling overall output rather than mandating production targets.
  • New measures released in August derive authority from the Mineral Resources Law and the Rare Earth Regulations, elevating rare earth governance from earlier measures implemented in 2012 and reinforcing Beijing’s ability to close loopholes and strengthen enforcement.
  • Industry participation is now limited to state-designated groups, and all production and sales must be recorded on a centralized traceability platform. This ensures rare earths remain firmly under central control, reduces opportunities for illicit flows, and enhances Beijing’s leverage in global competition.

On August 22, the People’s Republic of China’s (PRC) Ministry of Industry and Information Technology (MIIT), together with the National Development and Reform Commission (NDRC) and the Ministry of Natural Resources (MNR), jointly issued the “Interim Measures for the Administration of Total Volume Control over Rare Earth Mining and Rare Earth Smelting and Separation” (稀土开采和稀土冶炼分离总量调控管理暂行办法), replacing the “Interim Measures for the Administration of Rare Earth Directive Production Plans” (稀土指令性生产计划管理暂行办法) issued in 2012 (MIIT, August 22).

The new regulation retains some characteristics of a planned economy, with output still under the control of the central government. It also introduces upgrades and revisions to how the industry is regulated, enhancing central oversight, reducing the power of local governments, and digitizing data collection on supply chain flows.

State Advances Regulatory Authority Over Sector

The 2012 measures had as their legal basis two State Council instruments: the “Several Opinions on Promoting the Sustainable and Healthy Development of the Rare Earth Industry” (院关于促进稀土行业持续健康发展的若干意见) and the “Notice on Including Tungsten, Tin, Antimony, and Ionic Rare Earth Minerals in the List of Minerals Subject to State-Protected Exploitation” (院关于将钨、锡、锑、离子型稀土矿产列为国家实行保护性开采特定矿种的通知). By contrast, the latest document draws authority from the “Mineral Resources Law” (矿产资源法) and the State Council’s “Rare Earth Regulations” (稀土管理条例) (Changzhou Government, June 13, 2016; MIIT, August 22). In other words, the new measures are backed by much stronger authority, including by legislation passed by the National People’s Congress (NPC). This indicates that Beijing is elevating rare earth management from administrative regulation to statutory regulation, underscoring its intent to ensure long-term and stable control over the sector. It also reflects the use of legal coercive force to make it more difficult for local governments and enterprises to exploit loopholes for their own parochial interests.

In terms of scope, the 2025 version expands upon the 2012 document by adding “monazite concentrate” while removing “recycled resources”. According to a PRC metallurgical expert, monazite concentrate is rich in neodymium and praseodymium, which are essential raw materials for producing high-performance rare earth permanent magnets—key components in both the new energy sector and the defense industry (Author interview, 12 September). By contrast, the recycling of rare earth resources largely can be driven by market forces and therefore no longer requires inclusion under central planning. This shift reflects Beijing’s move toward more precise regulation focused on high-value strategic minerals, while allowing less critical resources to be guided by market mechanisms—a classic case of “grasping the big while letting go of the small” (抓大放小).

Beijing Centralizes Control and Shifts From Quotas to Caps

The 2012 regulation adopted what was called a “directive production plan” (指令性生产计划) system. In practice, this meant that MIIT divided the annual production quota into two installments—one for the first half of the year and one for the second half—and delegated these quotas to provincial governments, which then distributed them to enterprises. Second-half annual quotas typically were adjusted based on enterprises’ performance in the first half of a given year, as well as fluctuations in market demand and changes in environmental protection requirements.

The 2025 regulation, by contrast, introduced a “total volume control” (总量控制) system. Under this model, MIIT, the NDRC, and the MNR jointly determine the national annual production ceiling each year. This overall ceiling is then allocated directly to enterprises, meaning that each enterprise’s annual production cap is set at the beginning of the year. Enterprises no longer need to fulfill a planned production target; they only need to ensure that their output does not exceed the assigned cap. Moreover, in the 2025 regulation, provincial governments no longer participate in distributing quotas. Instead, they simply receive a copy of the central government’s allocation to enterprises and pass this information down to the lower-level authorities.

This change reflects a shift in Beijing’s concerns. Rather than fearing insufficient supply, the risk today is that oversupply could weaken the strategic value of rare earth minerals and diminish the PRC’s leverage in international competition. The diminished role of provincial governments also illustrates Beijing’s tightening of direct central control over rare earth production. This could be a response in part to past rumors of collusion between local authorities and enterprises to evade production limits and profit from illicit rare earth trading (Mingpao, May 19).

National Security Concerns Have Driven New Approach

Although security considerations were evident as early as 2010, when the PRC implemented rare earth export restrictions against Japan, the past decade has entrenched this logic, with national security increasingly overriding environmental priorities in Beijing’s rare earth governance. The shift across the two sets of measures reflects this creeping securitization. First, regarding enterprises, the 2012 document listed four requirements that any company had to meet to apply for rare earth quotas through provincial-level industry regulators. These provincial authorities would conduct a preliminary review, submit the application to the central government for final approval, and then relay the results back to the applicant. In other words, any enterprise that met the requirements could apply for quotas. By contrast, the 2025 regulation no longer allows enterprises to apply on their own. Instead, the MIIT, together with the MNR, determines the list of eligible companies while explicitly prohibiting “other organizations or individuals” (其他组织、个人) from engaging in rare earth mining or smelting and separation. This is another indication of the political center’s centralizing impulse, especially when it comes to resources it deems strategically significant. It follows the now-complete consolidation of many firms into six major state-owned rare earth groups, which has enabled such strict management (People, August 19, 2014). An additional benefit of this approach, from Beijing’s perspective, is that it effectively prevents illicit sales of strategic resources and ensures that they serve national objectives.

Second, the 2025 measures transition management of the industry from a paper-based to a digital system. From now on, enterprises must upload production, sales, and circulation data into a national rare earth product traceability platform, enabling full-chain tracking of product flows—who produces, who buys, and where the products ultimately go (MIIT, accessed September 25). The new document also emphasizes that enterprises must comply with data security obligations. This upgraded traceability system allows the central government to bypass provincial intermediaries and directly monitor corporate production and sales in real time, while networked systems make data falsification far more difficult.

Conclusion

Beijing’s management of the rare earth industry has shifted in the last decade toward centralized control of rare earths as a strategic resource. This shift, codified in the latest measures released jointly by three central ministries, is both a domestic industrial policy adjustment and an embodiment of Xi Jinping’s concept of “holistic (or comprehensive) national security” (整体国家安全观). By strengthening its direct grip on a sector in which the PRC remains dominant, Beijing now has even greater capacity to exert leverage on the U.S. electronics and defense industries, which remain reliant on PRC inputs. Coupled with an expanded toolbox of economic weapons that it is increasing willing to deploy, and absent progress in the United States and allied countries to develop a separate rare earth supply chain, the PRC is set to remain dominant for years to come.