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China's Policy on Mineral Resources

I. The Present Situation of Mineral Resources and Exploration and Exploitation of the Resources

China has discovered 171 varieties of mineral resources, and 158 of them with proved reserves. There are 10 energy-related mineral resources, including oil, natural gas, coal, uranium and geotherm; 54 metallic minerals, including iron, manganese, copper,aluminum, lead and zinc; 91 non-metallic minerals, including graphite, phosphorus, sulfur and sylvite; and three liquid minerals, including groundwater, and mineral water. There are nearly 18,000 production areas of mineral resources in China, including more than 7,000 big and medium-sized ones.

The basic characteristics of China's mineral resources are:

-- The total quantity of the resources is fairly big and there is a fairly complete variety of minerals. China has found a rathercomplete variety of mineral resources, and a fair abundance of mineral resources in total quantity. Large reserves have been verified of major minerals, such as coal, iron, copper, aluminum, lead and zinc. The country enjoys obvious advantages in the world in the resources of coal, rare earths, tungsten, tin, molybdenum, antimony, titanium, gypsum, bentonite, mirabilite, magnesite, barite, fluorspar, talc and graphite. There are abundant geothermal and mineral water resources, and the quality of the groundwater is good on the whole.

-- The average per-capita quantity of the resources is small, and there is an imbalance between supply and demand for some of the resources. The huge population and the low average per-capita quantity of mineral resources are a basic national condition in China. The per-capita quantity of mineral resources held by the Chinese people is at a comparatively low level by global standards.There are acute shortages of diamonds, platinum, chromite and sylvite.

-- Superior mineral ores exist side by side with inferior ones.There are both high-quality ores and those of low grade and complex constituents. The quality is fairly high for tungsten, tin,rare earths, molybdenum, antimony, talc, magnesite and graphite, while in the case of iron,manganese, aluminum, copper and phosphorus there is an excess of low-grade ores, paragenous and associated ores and those refractory for dressing and smelting.

-- The resources with a low degree of geological control account for a greater proportion of the verified reserves of the mineral resources. In the structure of the verified reserves of the resources, there are more resources, but less reserves or basic reserves; more resource reserves with poor economic workability or with uncertain economic significance, but less resource reserves with ideal economic workability; more controlledand deduced resource reserves, and less verified resource reserves.

-- The conditions for mineralization are good, and there are good prospects for finding more mineral resources. There is a big potential for finding more oil, natural gas, gold and copper. The deeper formations and outlying areas of the old mining areas and the western regions are the major substitute areas of mineral resources.

China is one of the first countries in the world to develop itsown mineral resources. After the founding of the People's Republicof China, the Chinese government made great efforts to strengthen geological work, and explicitly demanded that this work should go ahead of the economic construction. It formulated the strategic principle for "the development of the mining industry" and made specific arrangements for the exploration and development of mineral resources in all its five-year plans. Great progress has been made in the exploration and exploitation of mineral resources,so that China has gradually become a major country in mineral resources and the mining industry. Mineral resources prospecting and exploitation have supplied large quantities of energy and raw and processed materials for economic construction; provided important sources of revenue; accelerated the development of regional economies, especially economic development in regions inhabited by the ethnic minorities as well as remote and border areas; promoted the rise and growth of mining cities (townships) with mineral resources exploitation as their pillar industry; and solved the problem of employment for large numbers of local people,thus making a major contribution to socio-economic development in the country.

-- A large number of mineral resources have been discovered andascertained. The discovery and construction of a large batch of oil and gas fields, represented by the Daqing Oilfield, has turnedChina from an oil-poor country into one of major oil-producing countries in the world. China has discovered or expanded a number of major mineral deposits, including the rare-earth metal mine in Bayun Obo, the Dexing Copper Mine,the Jinchuan Nickel Mine, the Shizhuyuan Tungsten Mine, the Luanchuan Molybdenum Mine, the Ashile Copper Mine, the Jiaojia Gold Mine, the Yulong Copper Mine,the Dachang Tin Mine, the lead-zinc mines at Changba and Lanping, the Dongsheng-Shenmu Coalfield, the Zijinshan Copper-Gold Mine andthe Yangbajain Geothermal Field. It has also discovered and ascertained a number of major sources of groundwater supply. Partsof the western regions have gradually revealed good prospects for finding mineral resources. New resources have been found in the outlying areas or deeper strata of some of the existing mines. A succession of achievements has been made in the new round of large-scale land and resources survey. The surveys of mineral resources over the past 50 years and more have turned China from a country with uncertainty on mineral resources to a country rich in mineralresources, from a country with little-known groundwater resources to a country with groundwater playing a key role in the national water supply. At the same time, China has fostered a large contingent of geological surveyors with a fine tradition and working style, and strong technical forces, who have made important contributions to economic construction in China.

-- The scale of mineral resources exploitation has expanded rapidly. In 1949, China had just over 300 properly developed mines,producing annually about 120,000 tons of crude oil, 32 million tons of coal, 160,000 tons of steel, 13,000 tons of non-ferrous metals, 10,000 tons of pyrite and less than 100,000 tons of phosphorus. Over the past 50 years or more, China has evolved a large supply system for energy, mineral products and other raw andprocessed materials, with the successful construction of large petroleum-producing bases such as Daqing, Shengli and Liaohe; large coal-mining centers such as Datong, Yanzhou, Pingdingshan, Huainan, Huaibei and Junggar; large iron and steel production bases such as Shanghai, Anshan, Wuhan and Panzhihua; large non-ferrous metal refining bases such as Baiyin, Jinchuan, Tongling, Dexing and Gejiu; and large chemical mining centers such as Kaiyang, Kunyang and Yunfu. The mushrooming of mining cities has accelerated urbanization in the country. At present, China's output and consumption of mineral products rank among the biggest in the world. In 2002, China had 489 large mines, 1,025 medium-sized ones, and well over 140,000 small ones and sand and clay quarries, employing a total of 9.07 million people, with the output value of the mining industry coming to 454.2 billion yuan. It produced 167 million tons of crude oil and 32.7 billion cubic meters of natural gas. The amount of mineral ores, and sand and clay excavated totaled 4.849 billion tons, including 1.38 billion tons of raw coal, 231 million tons of iron ore, and 23.01 million tons of phosphorus ore; while the output of 10 non-ferrous metals totaled 10.12 million tons. The output of raw coal, steel, 10 non-ferrous metals and cement ranks first in the world; the output of phosphorus ore and pyrite ranks second and third, respectively, and that of crude oil takes the fifth place. The state-owned mining enterprises form the pillar of mineral resources exploitation in China, and also the stable supply base for its energy and raw and processed materials industries. The crude oil, natural gas and 36% of the output of other mineral ores come from 7,679 state-owned mining enterprises. The state-owned mining enterprises have not only laid the foundation for industrial and agricultural development, but also made important contributions tothe improvement of the people's living standards and the growth ofthe comprehensive national strength. Since the mid-1980s, other types of mining enterprises have also witnessed rapid development.There are now 140,000 non-state-owned mining enterprises, including 132 established with investment from Hong Kong, Macao and Taiwan businesses, and 160 with foreign investment.

-- The level of mineral resources protection and rational utilization has been gradually raised. In the past 50-odd years, China has made great progress in its use of geo-physical exploration, geo-chemical exploration, remote-sensing, drilling and tunneling technologies, laboratory test and computer technology for mineral resources prospecting. It has raised the scientific and technological level of its mineral resources exploration. Notable results have been obtained in the multipurpose use and recovery of mineral resources, and the rate of resources utilization has been gradually increased. At present,the recovery rate of scrap steel in China is 40%, and the comprehensive recovery rate of scrap non-ferrous metals is 27.70%.Supplies of practically all platinum-group and scattered elements have come from the multipurpose use of mineral resources. Nearly one third of the raw materials for sulfuric acid are also recovered in the production of non-ferrous metals. Some of the coal mining enterprises produce the coal-associated gas, oil shale,kaolin and high-alumina clay for multipurpose development, and process and utilize coal gangue and flyash, reaping good economic results and environmental benefits.

-- Foreign trade in mineral products has grown fast. China's total volume of imports and exports of mineral products, energy and raw and processed materials came to 111.1 billion US dollars in 2002, accounting for 18 percent of China's total volume of imports and exports. Mineral products that were imported in large quantities included crude oil, iron ore, manganese ore, fine copper ore and potash fertilizer. Meanwhile, China exported large quantities of lead, zinc, tungsten, tin, antimony, rare earths, magnesite, fluorspar, barite, talc, and graphite, and other leading mineral products. China's cooperation with other countriesin the field of mineral resources is expanding constantly. Throughprospecting for offshore oil and gas resources in cooperation withforeign companies, a number of new oil and gas fields have been discovered, and the offshore oil and gas output has grown year by year. Prospecting for and exploitation of oil and gas resources inother countries have reached a certain scale. Prospecting for and exploitation of hard rock mineral resources in other countries have also begun. Relations of cooperation in long-term research and development in the field of coal bed methane have been established with some countries.

However, there are still some contradictions and problems in mineral resources survey and development in China. They are mainly:

-- The contradiction between the fast economic growth and the huge consumption of some mineral resources. There is a fairly large gap between the supply and demand in oil, high-grade iron, high-grade copper, fine-quality bauxite, chromite and sylvite. Thedegree of difficulty in looking for mineral resources by geological means in the eastern regions has increased, and the increase range of proved reserves there has slowed down. The production in some mines has entered the middle or late phase, andtheir reserves and output are decreasing year by year.

-- Serious waste and environmental pollution still exist in theexploitation and utilization of mineral resources. The overall arrangements of the mining areas are not satisfactory, and the prospecting and mining technologies are backward, and there is still serious waste in the consumption of resources. The protection of the environment of the mines calls for further improvement.

-- Mineral resources exploration and exploitation are imbalanced between regions. The western regions and the outlying parts of the central regions abound in resources, but their natural conditions are poor, their ecological systems are weak, and the work of geological survey and assessment remains at a low level, thus restricting the development of the resources.

-- The degree of market-oriented exploration and development ofmineral resources is not high. The market-oriented systems regarding the rights of prospecting for and extracting of mineralsshould be further improved. Management of mineral resources shouldbe further improved and standardized. The scope of international exchange and cooperation in the field of mineral resources should be further broadened.

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