The Influence of State-Owned Firms in China; the Power of the State Paradigm in Reinforcing Point of View, But what Dynamism Changes the Assumptions Tomorrow?

Highlights

• Chinese researchers from the Ministry of Natural Resources and Shandong University emphasize the strategic importance of mineral resource development in national economic security.
• China maintains dominant control over rare earth element processing (80%+) through state-owned holding mines and strict regulatory frameworks.
• The study reveals evolving governance measures, ecological constraints, and the pivotal role of state-owned enterprises in securing China’s energy and mineral resources.

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Researchers affiliated with Beijing, China’s Ministry of Natural Resources (opens in a new tab) as well as Shandong University of Science and Technology (opens in a new tab) in Qingdao, in China’s eastern Shandong province emphasize in a paper the critical role of energy and resource security in national security and economic development, highlighting the significance of mineral resource development in this framework. Published earlier this year in China Mining Magazine, (opens in a new tab) the energy and earth scientist focused authors emphasize the stabilization and advancement of China’s mining sector, boosted by high mineral prices, favorable national policies, and enhanced governance and regulation of mining activities.  Put together this refers to the active orchestration of a command control economy combined with dynamic free market forces when convenient or supportive.  The authors investigate state-owned holding mines, which are integral to ensuring energy and resource security according to this paradigm. The authors offer detailed statistical and comparative analysis revealing mine location mostly in central and western China, plus continuously improved scale, and operational efficiency. These state-owned entities hold a dominant position in the development of critical energy and rare earth minerals, particularly in rare earth metals, where they maintain a decisive advantage.

Of course, this is set in the context of the worldwide global rare earth supply chain, where China controls about 80% or more of the rare earth element processing.   Of course, as we have reported at Rare Earth Exchanges this did not result from an overnight process, but rather has been the result of a well-planned, orchestrated and executed scheme over decades, with substantial compliance with Western governments and corporations.

Ministry of Natural Resources

Key trends from this Chinese paper include a declining investment share and proportion of state-owned holding mines in recent years, despite significant increases in the absolute economic outputs of these mines.

The changes are attributed to strengthened governance measures, ecological constraints, and the aftermath of financial crises. The study concludes that state-owned holding mines play a pivotal role in securing China’s energy and mineral resources, particularly for strategic materials, and offers insights into optimizing future management practices to bolster energy and resource security.

What are some assumptions or biases involved in this paper?

For starters, the study authors assume that the current regulatory and governance framework will continue to evolve positively, further stabilizing the mining sector, at least in the People’s Republic of China.

The authors also presume that state-owned holding mines will remain the primary vehicle for ensuring energy and resource security in China.  And likely this is a safe bet and food for thought for Western policy makers, company executives and regulators in this sector.

The analysis assumes that the trends identified in the study (e.g., dominance in rare earth metals, improved operational scale) are indicative of future performance without significant disruptions.   But we report here at Rare Earth Exchanges at conflict and contradiction in the rare earth element production complex, e.g., the need for reform, modernization, more efficiency, etc.

Little to no emphasis is placed on the vast, myriad efforts now underway across most Western governments to change the status quo in this mission critical field.   Historical change occurs due to a confluence of factors and forces including human agency as recognized in development of and execution of policy and business practices.

What are the biases?

The author’s analysis seems to exhibit a bias toward emphasizing the role and effectiveness of state-owned enterprises, potentially overlooking contributions or challenges faced by private or foreign entities in the sector.

There could be a bias in framing ecological and governance reforms as universally beneficial without fully addressing potential trade-offs, such as reduced investment incentives or regional economic disparities.

The focus on national security could skew the interpretation of data to align with broader geopolitical narratives, emphasizing strategic dominance over global cooperation in mineral resource development.  And this apparent bias informs policy makers, executives, and others in the West.

The Authors

Corresponding authors QIU Weiwei and Wu Chuguo are associated with the Ministry of Natural Resources (opens in a new tab) (MNR), a government agency in China that manages the country’s natural resources.  This part of the Chinese “state” oversees the development, protection, and use of natural resources, including forests, wetlands, national parks, and grasslands. The unit of national government establishes and implements spatial planning systems, manages surveying, mapping, and geological exploration, and registers rights.

The MNR was founded on March 17, 2018. It is part of the State Council, China’s cabinet.

The MNR supports the use of new technologies such as cloud computing, artificial intelligence, and big data to create a national spatial basic information platform.

The Ministry of Natural Resources in China regulates rare earth firms by strictly controlling mining and processing quotas, implementing a traceability system to monitor production and sales, enforcing strict penalties for illegal activities, and essentially nationalizing rare earth resources, meaning only designated companies approved by the government can engage in rare earth mining and extraction, effectively limiting the number of firms involved in the industry and allowing for tight oversight.

What about a glimpse into the structure of China’s rare earth sector?  See Rare Earth Exchanges’ “_The Structure and Industrial Policy of China’s Rare Earth Element Industry.”_