Abstract: Mineral resources play a crucial, foundational role in China’s economic and social development. However, with economic growth and population expansion, China’s mineral resources are facing a severe situation: the reserves of exploitable resources are dwindling, and the degree of resource security is low; moreover, the country continues to run a persistent trade deficit in mineral products. In terms of mineral resource development, a series of problems remain, including extensive exploitation and utilization practices, escalating ecological damage, and an underdeveloped market for mining-related factors. This article analyzes the root causes of these issues and proposes ideas and recommendations for ensuring resource security under the new circumstances.
Keywords: Development and utilization of mineral resources, level of assurance, countermeasures
I. Introduction
In China’s economic and social development, mineral resources play a crucial, foundational role. More than 95% of energy sources, over 80% of industrial raw materials, more than 70% of agricultural production inputs, one-third of drinking water, and certain household goods used in both urban and rural areas all originate from mineral resources. If we take into account downstream industries such as manufacturing, the mining sector supports the operation of more than 70% of the national economy and its related sectors.
Currently, China is entering a new stage of accelerating modernization, and its population growth is approaching its peak. From a practical standpoint, there is an increasing need for mineral resources to support this development—more than ever before. In recent years, due to China’s rapid economic growth, the consumption of mineral resources has surged dramatically. As a result, the rate of resource depletion for key minerals such as oil, iron, copper, and aluminum has outpaced the growth rate of newly discovered geological reserves. In particular, shortages of several critical mineral resources have become a “bottleneck” hindering the sustainable development of our economy and society. In 2007, China’s imports of major scarce mineral products continued to rise: crude oil imports reached 163 million tons, and iron ore imports totaled 384 million tons. According to projections, over the next two decades—as China completes its industrialization—the cumulative demand for mineral resources such as oil, natural gas, copper, and aluminum will be at least two to five times the current reserves. Therefore, under the current new circumstances, it is of great significance to re-examine and reassess China’s mineral resource security issues and to formulate sustainable development strategies for mineral resources. This will play a crucial role in implementing the new scientific development strategy and ensuring the steady and healthy development of our economy and society.
II. Analysis of the Mining Industry Situation in China
1. General Characteristics of Mineral Resources
A major characteristic of China’s mineral resource situation is its rich variety and large total reserves, yet per capita ownership remains insufficient. Currently, China has identified 171 types of minerals, with proven reserves for 159 of them. Over 200,000 mineral deposits (and sites) have been discovered, among which more than 20,000 have undergone detailed exploration. China’s total mineral resources account for approximately 12% of the world’s total, placing it third globally after the United States and Russia. However, per capita resource ownership is only 58% of the global average, ranking China 53rd worldwide. Moreover, China faces the following shortcomings: First, while minerals with relatively low usage are abundant, reserves of certain bulk minerals fall far short of meeting the demands of socio-economic development. For instance, China ranks among the world’s top producers of tungsten, tin, rare earth elements, molybdenum, and antimony—minerals used in relatively small quantities—but these resources are of high quality and highly competitive. In contrast, reserves of minerals in high demand, such as oil, natural gas, high-grade iron ore, potash, copper, aluminum, gold, and silver, are severely inadequate. Second, there are relatively more low-grade ores and fewer high-grade ores, making extraction and utilization significantly more challenging. Take iron ore as an example: the total identified reserves amount to 57.662 billion tons, with basic reserves of 22 billion tons; however, over 95% of these reserves consist of low-grade ores that are difficult to directly utilize. The average iron content is only 33% (Figure 1), with most iron ores having a grade between 25% and 40%, accounting for 81.2% of the total identified reserves. Ores with grades below 25% make up 4.6%, those between 40% and 48% account for 11.5%, and high-grade iron ores with grades above 48% represent only 1.9%. Third, there are many small- and medium-sized mines but few large or super-large deposits, resulting in relatively small mine scales and increasing the difficulty of intensive, large-scale, and efficient exploitation. To date, China has identified 900 copper ore deposits, of which only 2.7% are large-scale deposits. Fourth, there are many coexisting and associated minerals, whereas single-mineral deposits are relatively scarce, making utilization more difficult and costly. Among the 139 mineral types currently being developed and utilized in China, 87 are derived partly or entirely from coexisting or associated minerals. Given the current level of economic and technological development, not only are some resources wasted, but the high difficulty of extraction and utilization also drives up production costs. Fifth, resource distribution across regions is uneven: energy minerals are mainly concentrated in the north, iron ore deposits are primarily located in the northeast and southwest, phosphate deposits are predominantly found in the south, and the middle and lower reaches of the Yangtze River hold the largest concentration of copper deposits. Furthermore, many large and super-large mining areas that remain undeveloped are situated in remote western regions.
In addition, according to the recent analysis of China’s reserve conversion results, the structure of mineral resource reserves also exhibits the characteristic of “three shortages and three surpluses”—that is, few reserves and basic reserves, but many resources; few economically viable reserves, but many reserves with poor economic viability or whose economic significance remains undetermined; and few proven reserves, but many controlled and inferred reserves.
2. Current Status of Mineral Resource Exploration
From a resource perspective, the current status of mineral exploration in China can be summarized as follows: First, the level of mineral exploration has been increasing rapidly, yet its development remains highly uneven. For instance, western and remote central regions of China are rich in mineral resources, but they suffer from poor natural conditions, fragile ecological environments, and low levels of geological survey and evaluation—factors that severely constrain resource development. Second, although the exploration workload is immense, investment remains critically insufficient. The capital sources for China’s mining industry still bear strong characteristics of the planned economy, primarily relying on government appropriations. In 1999, the geological exploration sector underwent reform, under which the state finance, in principle, no longer provides funding for commercial mineral exploration; only a small amount of funds is allocated to public-interest mineral resource surveys and evaluations. Given that market-based financing has yet to play a substantial role in the commercial exploration and mining stages—and due to high borrowing costs from banks and difficulties in obtaining market financing—commercial investment in China’s mining sector remains limited to small-scale operations. Although the state has increased its investment in recent years, compared with the demands of the country’s rapid economic development, effective investment in mineral exploration in China still falls significantly short. As a result, the volume of drilling work has declined year by year, thereby hindering progress in resource exploration efforts.
3. The import and export of mineral products are in a trade deficit.
China boasts abundant total reserves of mineral resources and is a major producer of mineral products. However, due to the unique geological conditions favorable for mineral formation, China not only possesses a large number of mineral resources that give it a global competitive edge but also faces shortages in certain resources that cannot meet domestic demand. While China can export its advantageous mineral resources after developing them, it must import scarce resources from international markets or develop foreign sources to make up for the shortfall. Over the past decade or so, as the process of global economic integration has accelerated and China’s economic cooperation with countries around the world has intensified, China’s trade in mineral products has made significant progress. Nevertheless, the trade balance for mineral products continues to show a persistent deficit, with imports consistently exceeding exports—a fundamental characteristic of China’s mineral product trade. For example, following the successful development of the Daqing Oilfield, China quickly ended its historical reliance on imported oil and began exporting crude oil starting in the 1960s. In recent years, with China’s rapid economic growth, demand for petroleum has surged dramatically, causing China’s crude oil exports to decline steadily while imports have steadily risen. Beginning in 1993, China shifted from being a net exporter of petroleum to a net importer, and the volume of imports has shown a year-on-year increase ever since. In 2007, China imported a total of 163.2 million tons of crude oil, representing a growth rate of 12.4%, with external dependence reaching 46.05%.
4. The contradiction between supply and demand for mineral resources is becoming increasingly acute.
Since the start of China’s reform and opening-up policy, by prioritizing the development of the energy and raw-materials industries and expanding the scale of mineral imports and exports, the long-standing shortage of energy and raw-material supplies in China has been largely reversed. As a result, many key minerals and processed mineral products—such as coal, nonferrous metals, steel, and cement—have shifted from supply shortages to oversupply situations. However, in recent years, China’s economy has experienced rapid growth, leading to a sharp increase in demand for minerals. This has made the domestic supply-demand situation for mineral resources increasingly severe, with the contradiction between supply and demand for mineral resources becoming ever more pronounced. Reserves of oil, coal, copper, iron, manganese, and chromium have continued to decline, and in the long run, the gap and shortages are set to widen further. According to forecasts, of the 45 major minerals currently available in China, only 24 can meet demand through 2010, and just 6 can meet demand through 2020. China’s per capita water resources amount to only one-quarter of the global average, and their distribution is highly uneven, with serious pollution problems. According to the Ministry of Water Resources’ “Analysis of China’s Water Supply in the 21st Century,” after 2010, China will enter a period of severe water scarcity. As a result, China’s GDP will decline by 1.5 to 1.9 percentage points annually due to water shortages. The long-term contradictions in the development of mineral resources are particularly acute.
III. Problems in Mineral Resource Development
1. Imbalance between supply and demand, with tight reserve resources.
Our country is currently at a critical stage of modernization. The rapid economic growth has led to a sharp increase in demand for mineral resources. Each year, China consumes more than 5 billion tons of ore, making it the world’s second-largest consumer of mineral products. Although China boasts one of the most diverse ranges of mineral resources globally and possesses substantial total reserves, the share of major mineral reserves relative to global totals remains relatively low, and per capita resource endowment is also quite unsatisfactory. Compared with the global population share of 21%, the reserves of China’s major discovered mineral resources are not abundant—they are actually quite scarce—thus providing only limited assurance for socio-economic development. For instance, when measuring resource security through the “reserve-to-production ratio”—which indicates the number of years a given reserve can sustain current production levels—it becomes clear that the static reserve-to-production ratios for most of China’s key mineral resources fall below the global average. Even coal, despite its abundant reserves, offers a static resource security level that is less than half the global average. Moreover, the consumption of minerals such as oil, iron, manganese, chromium, copper, aluminum, and potash salts heavily relies on imports, and the existing reserves provide an even lower degree of assurance relative to consumption (the “reserve-to-consumption ratio”).
In recent years, China has become a major net importer of mineral products. In 2004, China’s imports of mineral products and their processed derivatives exceeded 100 billion U.S. dollars, with net imports of crude oil surpassing 100 million tons. Going forward, China will face substantial shortages in key mineral resources such as petroleum, natural gas, iron ore, copper, and aluminum. Over the next 20 years, China’s total demand gaps will amount to: over 6 billion tons of petroleum, more than 2 trillion cubic meters of natural gas, a steel deficit of 3 billion tons, over 50 million tons of copper, and 100 million tons of refined aluminum. By 2020, the petroleum deficit is expected to range from 2.2 billion to 3.2 billion tons, while the natural gas deficit will be between 50 billion and 70 billion cubic meters (Table 3). China’s dependence on foreign sources for petroleum will reach 60%.
Over the next 20 years, China’s major mineral resources—except coal—are set to face critical shortages. Specifically, the oil demand gap will exceed 6 billion tons, the natural gas gap will surpass 2 trillion cubic meters, the total steel shortage will reach 3 billion tons, the copper shortage will exceed 50 million tons, and the refined aluminum shortage will amount to 100 million tons.
Due to the continuous surge in global crude oil prices—having risen from $30 per barrel in 2002 to over $140 per barrel recently—we are now facing a serious test of energy security. The structural imbalance between supply and demand for mineral resources will persist for the long term, inevitably having negative impacts on China’s economic development.
2. Resource development and utilization are extensive, leading to severe resource waste and damage.
Currently, China is in the mid-stage of industrialization. Economic development still relies heavily on extensive resource consumption and crude growth patterns. Compared with developed countries, China’s output per unit of resource remains significantly lower—equivalent to just one-tenth of the U.S., one-twentieth of Japan, and one-sixth of Germany. The overall recovery rate of mineral resources stands at 30%, which is 20 percentage points lower than that of developed nations. The volume of secondary utilization of nonferrous metals accounts for only 15%–20% of total production, whereas in developed countries this figure reaches 30%–40%. On average, the recovery rates for mining and beneficiation of metallic ores are 10%–20% lower than international standards. Approximately two-thirds of mines containing coexisting or associated valuable components have yet to embark on comprehensive utilization. Among those mines that have already adopted comprehensive utilization, the overall resource utilization rate falls below 20%; the utilization rate of tailings is merely 10%.
The energy and raw materials consumed per unit of output are several times—sometimes even ten or more times—higher in developing countries than in developed nations. For example, the energy consumed to generate each dollar of GDP in China is 4.3 times that of the United States, 7.7 times that of Germany and France, and 11.5 times that of Japan. Energy-use efficiency in China lags behind that of developed countries by 20 years, with a gap of 10 percentage points. Energy consumption intensity is significantly higher than both the average levels of developed countries and the global average—roughly three times that of the United States, 3.8 times the OECD average, and 7.2 times that of Japan.
3. Environmental pollution and ecological damage are intensifying.
With the development and utilization of various mineral resources, large quantities of solid wastes such as gangue, tailings, waste rock, and fly ash have been generated. In China, the cumulative volume of mine wastes is enormous and continues to grow year by year. According to surveys, the total stock of mine tailings, waste rock, and low-grade ores in provinces such as Shandong, Shanxi, Hebei, and Gansu amounts to 4.98 billion tons, with an annual increase of 690 million tons. Among these, the annual increase in tailings alone is close to 100 million tons (Table 4). Based on these figures, the nationwide stock of solid mine wastes totals hundreds of billions of tons, and the annual increment in waste generation will exceed 3 billion tons.
Meanwhile, disasters such as ground subsidence and land cracks caused by mineral extraction, as well as the discharge of untreated tailings wastewater, waste oils, and exhaust gases, which pollute water bodies, land, and the atmosphere, have all inflicted severe damage on the ecological environment.
4. The mining market is operating sluggishly, and the investment environment still needs improvement.
In terms of the market entities involved in mineral rights, government departments simultaneously act as both players and referees. As for the object of these rights—the mineral rights themselves—there is currently a widespread lack of clarity regarding mineral rights that were initially explored with state funding or that have been nationalized for various reasons. Moreover, the exact number of mineral rights available for transfer in the primary market remains uncertain. In the secondary transfer market, some mineral right holders, in order to evade paying the mineral rights fee, engage in clandestine, illegal transfers and covert transactions. With regard to intermediary services related to mineral rights, China has yet to fully develop many types of intermediary services beyond the valuation of mineral rights; thus, intermediary elements in the mineral rights market are conspicuously “absent.” The various restrictions imposed on the circulation of mineral rights run counter to the principles of a market economy. In China, mineral rights are divided into prospecting rights and mining rights, and regulations stipulate that after obtaining prospecting rights, exploration entities cannot automatically acquire mining rights if they discover mineable minerals—instead, they are granted only a priority right to mine. From practical experience, although this provision of “priority mining rights” helps the state maintain control over strategically important minerals, it has also become a significant legal barrier to foreign investment. Furthermore, China’s reform of its mineral resources sector has seriously lagged behind, and to some extent, this delay has become a constraint on deepening reforms of the mineral resources market.
IV. Countermeasures and Recommendations
1. Further strengthen the survey, evaluation, and exploration of mineral resources to enhance the availability of domestic mineral resources.
Currently, the level of mineral exploration in China is generally low. In the western regions, numerous blank areas remain for mineral exploration, and a large number of geophysical and geochemical anomalies have yet to be verified. In the eastern key metallogenic belts, many hidden ore deposits have never been systematically explored, yet they still hold substantial untapped potential resources. The next phase of mineral exploration efforts will focus on the following aspects: ① Strengthening regional prospective surveys of mineral resources in the key metallogenic belts of the western region, striving to discover a new batch of significant mineral deposits; launching systematic exploration of hidden ore deposits in the eastern key metallogenic belts, particularly in the “second exploration space” below 500 meters, identifying and establishing a number of detailed resource exploration bases, leveraging existing beneficiation and smelting capacities, and alleviating the current shortage of resources; ② Vigorously enhancing strategic mineral exploration, placing strategic mineral exploration at a high priority, with particular emphasis on oil and gas resources as well as critical mineral resources. Focusing on surveying and evaluating oil and gas resources in newly developed land areas and major offshore basins, and carefully conducting surveys and evaluations of unconventional energy sources such as natural gas hydrates and oil shale; ③ Effectively carrying out national basic and public-interest geological surveys and evaluations, providing the public with free-access information and data services, reducing risks associated with commercial geological work, stimulating the development of commercial geological activities, achieving breakthroughs in mineral exploration, and enhancing our capacity to secure mineral resources; ④ Adhering to the principle of “cherishing and utilizing mineral resources rationally, and genuinely balancing development with protection,” strengthening mineral resource surveys, evaluations, and exploration efforts, reinforcing macro-control over the exploitation and utilization of mineral resources, implementing the strictest resource management systems, promoting a shift in resource utilization patterns, and protecting and making rational use of mineral resources to ensure the sustained, healthy development of China’s mining industry and the long-term stability of its mineral resource supply.
2. Adjust and optimize the structure and layout of resource utilization, enhance resource-use efficiency, shift resource-use practices from extensive to intensive, and promote the effective protection and rational development and utilization of mineral resources.
We should promote the conservation of mineral resources and vigorously develop a circular economy. It is essential to establish the mining industry as an independent foundational sector in its own right, formulate a unified national development plan and strategy for the mining industry, advance reforms of the mining system, promote diversified property rights reforms, and encourage the integration of resources across industries and regions through capital-based linkages.
Based on the application of market mechanisms, reliance on scientific and technological progress, and the identification of alternative resources, we should plan and regulate the optimal rate of mineral resource depletion, ensuring that the development of the mining industry not only meets the needs of current generations but also does not jeopardize future generations' ability to meet their own needs—thereby achieving sustainable development in the mining sector and intergenerational equity. We must strive to tap into resource potential, enhance resource utilization efficiency, extend mine service life, and realize sustainable development. During the development process, we should maximize resource recovery rates, minimize damage and waste of mineral resources, and promote integrated and comprehensive resource development and utilization. This will help improve the ecological conditions of mining areas and foster coordinated development among mineral exploration, resource exploitation, ecological restoration, and environmental protection.
3. Fully leverage both domestic and international “two resources and two markets” to ensure that the demand for mineral resources is met for national economic and social development.
Mineral development should adopt a global perspective, fully leveraging the favorable opportunities presented by economic globalization and China’s accession to the World Trade Organization to create conditions for overseas investment. We should actively support domestic mining enterprises in participating in international mineral exploration and development, and encourage mining companies to engage in cross-border operations. By making full use of foreign resources, we can continuously enhance the competitiveness of China’s mining industry in both international mineral markets and capital markets, thereby ensuring a secure, stable, and reliable supply of foreign mineral resources. For example, the world boasts abundant reserves of oil, iron, chromium, manganese, copper, potash, and other minerals, which complement China’s domestic resources and markets remarkably well. Moreover, the international environment for mining investment has significantly improved, providing favorable conditions for China to expand its utilization of mineral resources and products from other countries.
4. Improve the ecological environment conditions of mining areas and promote coordinated development among mineral resource exploration, development and utilization, ecological restoration, and environmental protection.
It is imperative to strictly implement a strategy that combines both expanding sources and curbing expenditures, placing conservation first. In accordance with the principles of “orderly and paid utilization, balanced supply and demand, optimized structure, and intensive and efficient use,” we must adhere to the guiding principles of overall planning, scientific development, rational utilization, and legal protection. Based on regional mineral endowment conditions and the needs of local economic development, and guided by market forces, we should follow the principles of comprehensive planning, adaptation to local conditions, leveraging comparative advantages, large-scale exploitation, and intensive utilization. We must actively promote the exploration and development of advantageous mineral resources, properly balance the relationships among the central government and local authorities, among different localities, and between short-term and long-term interests, and thereby foster a rational spatial layout for mineral exploration and development as well as coordinated development of regional economies.
5. Improve the elements of the mineral rights market and refine the mechanisms for the transfer and circulation of mineral rights.
First, we must enhance the quality of market participants, strengthen the cultivation of entities in the mineral rights market, and ensure that all relevant elements fully enter the mineral rights market. Second, we should vigorously foster and develop intermediary institutions—such as socialized mineral rights valuation firms, information service providers, agents, legal consultants, and brokers—that provide support services to the market.
Standardize the approval system for mining rights. Grant exploration right holders the legal status of directly obtaining mining rights upon discovering mineral resources, and allow the transfer of mining rights. At the same time, streamline the procedures for acquiring mining rights, enhance operational efficiency, and promote the efficient functioning of the mining rights market from multiple angles, thereby better leveraging its role in resource allocation.
6. Improve and refine the legal and regulatory framework for mineral resources, and strengthen the legal status of mineral resource planning.
Currently, the "Mineral Resources Management Law" is being expedited for revision, and the "National Mineral Resources Plan" has been promulgated and put into effect. Moreover, the "Mineral Resources Plans" of most provinces and cities have already been completed. This marks the initial establishment of a macro-regulation mechanism for mineral resource exploration, development, and utilization that aligns with the requirements of China’s socialist market economy system, and the legal framework for mineral resource management is becoming increasingly comprehensive. Governments at all levels and administrative departments responsible for land and resources must earnestly implement the requirements of the "Mineral Resources Plan," further enforce stringent measures for the protection and management of mineral resources, and employ a variety of tools—including legal, administrative, economic, and technological means—to rigorously investigate and punish any violations of mineral resource laws and regulations, breaches of the Mineral Resources Plan, illegal mining activities, or acts that damage mineral resources. We must carry out in-depth, concentrated rectifications to restore order in the exploration and development of mineral resources, completely banning and strictly investigating illegal activities such as unlicensed exploration and mining, mining beyond authorized boundaries, using mining operations as a substitute for exploration, and illegally contracting or transferring exploration rights. We must firmly put an end to illegal mining practices that fail to comply with approved development and utilization plans, and set deadlines for suspending production and carrying out rectifications at mines engaged in disorderly mining, wasteful resource exploitation, and environmental destruction.
V. Conclusion
To ensure the sustainable and rapid development of our country’s economy and society, the question of whether mineral resources can be sustainably supplied has become a pressing issue we face. Under the current new context of national macro-regulation, we are required to adopt a scientific development outlook that is comprehensive, coordinated, and sustainable. Therefore, we must enhance our understanding of geological work, step up support for geological exploration and mineral prospecting, and establish a long-term system of strategic goals for China’s mineral supply and demand as well as for the mining industry. We should build a resource-conserving society, vigorously promote structural adjustments, transform traditional industrial models, develop a circular economy model, and facilitate a shift in the economic growth paradigm—paving the way for a new type of industrialization characterized by high technological content, strong economic benefits, low resource consumption, minimal environmental pollution, and full utilization of human resources. In doing so, we must strike a balance between the rational exploitation of resources to meet the needs of economic development and the vigorous promotion of integrated development, comprehensive utilization, efficient resource conservation, and the principle of coordinated and sustainable development. During the exploitation of mineral resources, we must attach great importance to environmental protection and firmly prevent any adverse phenomena such as environmental damage caused by resource development. By promoting the optimal allocation of mineral resources and ensuring their secure supply, we can foster the sustained and healthy development of China’s economy and society.
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