In the same month, the Ministry of Environmental Protection approved new industry standards for the sector to reduce pollution.

The State Council also said on Wednesday that the country will improve the industry's management and speed up its consolidation, adding that would involve mergers and restructuring.

Industry sources said the government wants to reduce the number of rare earth mines nationwide from 123 to less than 10, and cut the number of processing plants from 73 to 20.

Premier Wen Jiabao told the State Council meeting that the industry had been harmed by illegal mining and "chaotic" exports.

"There are still problems with the development of the rare earths sector ... and considerable chaos in export orderliness. These are seriously affecting the healthy development of the sector," he said, according to an account of the meeting published on the government website.

The State Council said it would take "about 5 years" to "establish a sustainable and healthy setting for the industry with reasonable mining, orderly production, efficient usage, advanced technology and intensive development".

An industry association is expected to be launched in May, sources said.