China's policies restricting exports of certain rare metals fail to protect the country's resources and undermine its validity to tap overseas resources, according to a report on China's mining industry.

The nation should adjust such policies so as to oppose resource protectionism, said the report, which was composed by a research team under the Chinese Academy of Social Sciences' Institute of Industrial Economics after research on domestic mines and enterprises of various kinds.

Late last month, the US and the EU filed a complaint with the World Trade Organization (WTO) against China on raising export taxes and reducing the export quotas on some raw materials, including some rare metals. They argued that the policy is not in line with China's commitment when it joined the WTO in 2001.

Luo Zhongwei, a professor who led the research, said China has rich deposits in rare metals and the government seeks to protect such resources.

"But disordered competition among domestic mining companies, particularly small-scale players, has led to great damage to many rare metal mines. It also causes problems of serious pollution and waste of resources," he said.

Luo said as a major metal consuming country in the world, China is in shortage of 80 percent of its mining resources. Restrictions on exports of certain rare metals also impose barriers for the country to tap overseas resources.

"The government should have a vision of 'global resources' and take advantage of overseas resources as well," the report said.

Instead of imposing restrictions on exports of rare metals, the report suggested the central government to take back the mining rights from local governments for better administration and higher efficiency.

Many mines could be kept unexplored when technologies are not ready, it said.

The Ministry of Commerce has defended China's restrictions on exports of certain raw materials, such as coke, bauxite, fluorspar, magnesium, manganese, silicon carbide, silicon metal, yellow phosphorus and zinc, saying that its policies were in keeping with WTO regulations and meant to protect valuable natural resources.

"The main purpose of certain export measures is to protect the environment and precious resources. These policies are in line with WTO rules," it said.

Meanwhile, the report also suggested China to establish a capital market for the mining industry because modern mining is a capital-intensive sector.

Luo said only listed firms should be allowed to be involved in mining as it helps to keep the mining market transparent and orderly.

(China Daily July 7, 2009)