Delegates, comrades:

　　This year’s China Prospecting Conference is being held under the “new normal”—a historical period that is both challenging and full of promise. That’s why I’ve titled today’s keynote speech “Facing Five Major Challenges Head-On and Accelerating Reform and Innovation.”

　　What is the “new normal”? President Xi summarized it in three sentences: shifting from high-speed growth to medium-high-speed growth; continuously optimizing and upgrading the economic structure; and transitioning from factor-driven and investment-driven growth to innovation-driven growth.

　　The 2015 China Prospector Annual Conference and the 9th Symposium for Hundred Geological Team Leaders were held from May 28 to 29 in Lujiang, Anhui Province.
The photo shows Wang Jiahua, Executive Vice Chairman of the China Mining Association, delivering a speech that directly addresses five major challenges and accelerates reform and innovation.

　　Experts say this is a strategic decision in the course of the great rejuvenation of the Chinese nation—a new revolution aimed at overcoming the “middle-income trap.” There’s no doubt that it has already arrived, whether you like it or not. We can be certain that China’s traditional economic model—characterized by high resource consumption and low environmental standards—will undergo adjustment. The shift toward a fundamentally new development paradigm for heavy industry, driven by institutional reforms, has now entered a phase of urgent necessity.

　　To prepare for this meeting, we conducted a comprehensive review of the overall situation in geological and mineral exploration. Last year, total investment in mineral exploration reached 112.05 billion yuan, of which 40.27 billion yuan was allocated to non-oil and gas exploration—a decrease of 12.4% year-on-year. During the same period, 144 new large- and medium-sized mineral deposits were discovered, including an additional 3 billion tons of iron ore, 4.419 million tons of copper metal, 11.388 million tons of lead and zinc metals, 210 million tons of bauxite, 840.6 tons of gold, and 7.912 million tons of potash salts. The achievements of the Strategic Action for Breakthroughs in Mineral Exploration have continued to expand. However, after conducting field research at the grassroots level, we also identified several prominent issues currently facing the national geological exploration industry: the mineral exploration market has contracted sharply, financing for mineral exploration has become severely challenging, and these challenges have already impacted, to varying degrees, the second phase of the Mineral Exploration Breakthrough Initiative. Under the “new normal,” the industry is confused about how to open up new markets for geological exploration, and the downward trend in the geological exploration economy shows no sign of abating. The current mixed operational model—combining government agencies and enterprises within the geological exploration sector—is reaching its limits, making it imperative to further deepen reform within geological exploration institutions. Moreover, self-regulation within the geological exploration industry urgently needs to be strengthened, and addressing the rule-of-law-based management of exploration activities remains a pressing challenge. Finally, the transformation and upgrading of the geological exploration industry’s real economy are lagging behind, and there is a pressing need to unlock new sources of momentum.

　　Of course, given the differences across regions and the varying stages of development among geological exploration units, the challenges we face are not limited to these five. Nevertheless, overall, these five major challenges have indeed become starkly apparent before us. As a result, some people say that winter is once again upon geological exploration work. How should we view the current situation? How can we adapt to the new normal? And how can we foster innovative development and cultivate a new type of geological exploration economy? These questions fill this year’s Prospector Conference with anticipation.

　　(1)

　　Mineral exploration is the core business of the nation’s geological survey teams. The global downturn in the mining industry has had a significant impact on this core business. What people are now concerned about is: just how long will this downturn last?

　　To answer this question, we must analyze it in the context of the global macroeconomy. In 2014, the combined GDP of the five major economies—the United States, the European Union, Japan, the BRICS countries, and ASEAN—totaled 59.11 trillion U.S. dollars, accounting for approximately 76.9% of the world’s total GDP and 63% of the global population. Among these five major economies, the U.S. grew at a rate of 2.4%, while China within the BRICS group grew at 7.4%, India at 5.5%, and ASEAN at 5%. The growth rates of all other economies were in the range of just a few tenths of a percentage point, essentially negligible.

　　Regarding the rigid demand for mineral products, mathematical models show that this demand is closely linked to the growth of per capita GDP. In agrarian economies, the demand for mineral products is relatively low. As a country enters the early stages of industrialization and urbanization (per capita GDP between $1,000 and $3,000), demand for mineral products begins to rise. During the mid-stage of industrialization and urbanization (per capita GDP between $3,000 and $10,000), demand experiences rapid growth. In the later stages of industrialization and urbanization (per capita GDP between $10,000 and $20,000), demand stabilizes at a high level. Once a country enters the post-industrial era (with per capita GDP exceeding $20,000), with the exception of oil and gas, demand begins to decline.

　　In 2014, China, India, ASEAN, and the United States performed relatively well on the macroeconomic front. Since the U.S. has already entered the post-industrial era, its demand for mineral products is less sensitive; moreover, following the shale gas revolution, demand for traditional energy sources has also been declining. With a per capita GDP of just over 1,500 U.S. dollars, India has only just begun to enter the phase of rising rigid demand for mineral products and has not yet reached the “period of rapid growth.” Among the ten ASEAN countries, only Thailand and Indonesia have entered the “period of rapid growth.” Thus, China remains the largest economy providing solid support to the global mining industry. Even so, China’s economy has entered a “new normal,” with slower growth rates. Furthermore, this shift has spurred adjustments in industrial structure: the tertiary sector now accounts for a larger share of the national economy than the secondary sector—and the tertiary sector consumes far fewer mineral resources per unit of output compared to the secondary sector.

　　In summary, although China’s rigid demand for mineral resources continues to grow, its growth rate has slowed down. Meanwhile, other emerging economies are unlikely to take over the baton of rigid demand for mineral resources in the short term. Therefore, the global mining industry’s entry into a downward adjustment phase should be seen within the broader “big picture.”

　　In the first four months of this year, although China’s economy has remained within a reasonable range, downward pressure has been mounting. Since November 2014, the central bank has cut the reserve requirement ratio twice and lowered interest rates three times. The CPI has entered the “single-digit” era, and the PPI has remained negative for 38 consecutive months, indicating that demand remains weak and the risk of deflation is increasing. Nevertheless, China’s economy still maintained a growth rate of 7% in the first quarter, earning it the nickname “spring breeze blowing over the willows” among global economies. By contrast, the U.S. economy saw growth as high as 5% in the third quarter of last year, but plunged to 2.2% in the fourth quarter, and then suffered an even sharper drop to just 0.2% in the first quarter of this year! As a result, leading economists believe that “the global economic recovery remains challenging.”

　　Affected by the macroeconomic environment, China’s mining industry saw its main business revenue decline by 14.5% year-on-year in the first quarter, and its profits fell by 61% year-on-year. Among them, coal and iron ore enterprises faced the greatest difficulties, with loss rates reaching 80% and 90% respectively. Fixed-asset investments in coal, ferrous metals, nonferrous metals, and certain nonmetallic sectors all posted negative growth. Against this backdrop, a negative growth in mineral exploration investment this year is virtually certain.

　　Looking at the global landscape, according to forecasts by the China Mining Association, the mining sector’s recovery still has some way to go. It will depend both on the extent of the global economic recovery and on whether certain emerging economies manage to break through successfully. India, ASEAN, and Africa represent the three major economies with the greatest potential for robust demand for mineral products. Together, their populations total 2.8 billion, and their current economic growth rates all exceed 5%. As these economies enter the “fast track” of industrialization and urbanization, the rigid demand for resources will surge, and resource prices will enter yet another upward cycle.

　　Currently, investment and financing in mineral exploration are facing significant challenges. These challenges stem both from the ongoing reform of the national fiscal system—under which fiscal funds are gradually withdrawing from competitive sectors—and from a market sentiment that is increasingly pessimistic about the traditional mining industry. Faced with these serious challenges, we must summon our spirits, accelerate reform and innovation, speed up the development of China’s risk exploration capital market, and help the real economy of geological exploration take flight on the wings of finance. Only by pursuing this path can we succeed—there is simply no other way.

　　The Decision adopted at the Third Plenary Session of the 18th CPC Central Committee points out the need to promote the orderly and free flow of both domestic and international factors, efficient allocation of resources, and deep integration of markets. However, China’s capital market for risk exploration started from scratch, leaving many areas where we still have much to learn. To achieve “deep market integration,” we simply cannot make progress without transforming our traditional mindset. At this conference, we are launching a special section dedicated to building the risk exploration market—providing relevant knowledge as well as conducting sandbox simulations—aiming to help geological exploration units across the country quickly get up to speed and realize their remarkable and magnificent takeoff.

　　It must be pointed out that a structural adjustment in mineral exploration is also imperative. Market factors such as the urgent need for specific mineral types, favorable conditions for development, and ease of monetization will determine the core competitiveness of mineral exploration efforts. The exploration market will not readily trust abstract notions of “large deposits” or “rich deposits”; only mineral deposits with genuine economic development potential will earn its favor.

　　Focusing on new technology minerals—such as the three rare metals, platinum-group metals, as well as magnesium, antimony, cobalt, fluorite, graphite, and others—is a necessity driven by today’s technological revolution. These minerals exhibit strong growth potential, enabling us to reap immediate benefits while laying the foundation for long-term gains.

　　We should soberly recognize that, at a time when the global mining industry is undergoing a deep and prolonged downturn, there are overseas peers facing even greater challenges than we are. In the global mining capital markets, the market capitalization of junior exploration companies has shrunk by 80% to 90%. Many of these mineral assets are of high quality—precisely the kind of opportunities that present excellent prospects for our acquisitions and mergers. Moreover, the national “Belt and Road” initiative has created new opportunities for us to go global. To prepare in advance for the next golden cycle in the mining sector and to innovate our development approach proactively, we must pull together as one, accumulate small contributions into a substantial whole, and leverage the collective strengths of our industry. The initiative proposed by the China Mining Association at this conference—to establish a “Belt and Road Mining Fund”—is precisely based on these considerations. We must earnestly draw lessons from past experiences and adopt a scientifically sound approach to going global. And harnessing the synergistic effects of industry clustering is precisely the key to effectively mitigating risks.

　　(2)

　　The contraction of the mineral exploration market is an objective reality that cannot be altered by human will. This means that geological survey units must actively explore new markets to make up for the shortfall in overall economic output.

　　This meeting proposed “exploring new markets for ecological civilization development,” primarily aiming to inspire a fresh perspective on markets.

　　China’s economy has maintained rapid growth for more than 30 years, pushing the carrying capacity of its ecological environment close to its limit. The report of the 18th National Congress of the Communist Party of China elevated ecological civilization to a new historical height by positioning it as one of the “five-in-one” components of development.

　　Since this is a national strategy, in addition to public-benefit and foundational work, there will inevitably be a vast market. However, this market still needs to be nurtured—and it requires vision to identify it.

　　To advance ecological civilization, the State Council has successively issued the “Air Ten Measures,” the “Water Ten Measures,” and—before year-end—will also release the “Soil Ten Measures.” Some geological exploration units have already taken the lead by developing soil remediation technologies for heavy-metal contamination. According to estimates by relevant institutions, the “Air Ten Measures” could stimulate investment totaling 1.6 trillion RMB; the “Water Ten Measures” could spur investment of 2 trillion RMB; and the “Soil Ten Measures” could unleash investment of as much as 10 trillion RMB. With such a massive market at stake, it all comes down to who has the strongest core competitiveness.

　　Historically, traditional hydrogeological and geological work has also served the cause of ecological civilization. However, under the new circumstances, we should significantly expand both the depth and breadth of this work. For instance, the emergence of new concepts such as “a community of life comprising mountains, rivers, forests, farmland, and lakes,” “ecological and environmental health,” and “quantitative assessment of ecological capital” all hold the promise of creating new markets.

　　In fact, the question of where the market lies is an eternal one. As Chinese consumers’ living standards continue to rise, their demands for ecological and environmental quality will also keep increasing. Although market demand may undergo certain shifts, the market potential in the ecological and environmental sector will not fundamentally change—it will only grow larger and become increasingly sophisticated.

　　The same holds true for mineral exploration: as technology advances, what was once not considered a “mine” may now be recognized as one. Similarly, deep-mining operations that were previously deemed uneconomical may one day become economically viable.

　　Everything is bound to change. For the traditional geological exploration and physical economy, it’s now imperative to quickly adopt “Internet Plus” to transform and upgrade them.

　　The essence of “Internet Plus” lies in the online and data-driven transformation of traditional industries, encompassing technologies such as mobile internet, cloud computing, big data, and artificial intelligence. Its defining characteristic is that each industry and each enterprise must identify entry points for integration based on their own specific pain points.

　　For the film industry, the biggest pain point is that “actors are too expensive, and getting the casting wrong can be disastrous.” Today, producers operate like this: They first go to Baidu and check how many fans each star has; if the script is adapted from a novel, they look up how many readers the novel has. If the total number of fans of all the stars in a movie exceeds 100 million, the movie’s box office revenue can be calculated without having to take any chances or make any guesses.

　　The WeChat tools provided by Tencent have been widely replicated across various aspects of daily life. From medical appointment booking and dining to entertainment and ride-hailing, all these services are now seamlessly integrated with mobile devices—everything can be handled with just a single smartphone. The design blueprints for these solutions also include smart schools, smart airports, and smart cities...

　　What are the pain points in the geological exploration industry? “The risk of mineral exploration is too high, it’s difficult to secure funding for exploration efforts, and it’s even harder to monetize the results of exploration.” Can these challenges be overcome through “Internet Plus”? I believe that with the concerted efforts of our industry’s top talents, we can indeed surmount these obstacles.

　　During this year’s Two Sessions, the “Equity Crowdfunding Pilot Program” was included in the Government Work Report. So-called “equity crowdfunding” refers to a system in which qualified investors purchase shares through online investment platforms, thereby becoming early-stage angel investors. In the future, they may reap capital gains or dividends upon the company’s IPO—or, of course, their investment could fail entirely, resulting in a total loss of their funds. This means that a company no longer needs to go public via an IPO on the capital markets to secure investment.

　　Financing for risk exploration actually requires a substantial number of angel investors. Whether we can adopt “equity crowdfunding” is something everyone can discuss. At this conference, we’ve set up an “Internet Plus” forum—a platform designed to broaden your horizons. We hope that all geologists can keep pace with the Internet era and take the transformation and upgrading of the geological exploration industry’s real economy to a new stage.

　　It’s important to remind everyone that “crowdfunding” is just a hair’s breadth away from illegal fundraising. All our reforms and innovations must be lawful and compliant. To achieve this, we need to keep learning continuously, clarify things thoroughly, think them through carefully, and only then proceed with action.

　　(3)

　　The reform and development of geological exploration teams is one of the key themes of this conference. Before the meeting, when reporting to Vice Minister Wang Min on the preparations for the conference, Minister Wang offered some highly important insights: The classified reform of geological exploration institutions should avoid a one-size-fits-all approach. Whether they are categorized as Type I or Type II public-interest institutions, they must deliver tangible public-interest geological services—providing public-service products to society. As for geological exploration institutions with a public-service nature, how should they secure funding? How can they go public? Mixing public-service and commercial operations will inevitably lead to problems, especially now that the regulatory framework has become more standardized and oversight has been tightened.

　　At this meeting, dozens of bureau leaders have gathered. It is highly necessary to thoroughly study and discuss the reform of the geological exploration teams. Comrade Lu Jin, Executive President of the Geological Exploration Association and Director-General of the China Metallurgical Geology Bureau, will take the lead in organizing this symposium. Through comprehensive planning, identifying the right positioning, setting clear goals, and choosing the optimal path, this initiative will become an important milestone in the nationwide reform of the geological exploration industry.

　　This conference will adopt the “Self-Discipline Declaration for the Geological Exploration Industry” and the “Proposal on Further Improving the External Environment for Geological Exploration Work.” The former emphasizes industry integrity and self-regulatory constraints. Currently, falsified reports occur from time to time, seriously undermining the entire industry’s integrity system. We must take strong measures to crack down rigorously on fraud and punish those who harm the industry; otherwise, we will end up undermining our own defenses. The latter proposes that the government accelerate the process of governing geological exploration according to the rule of law, bringing geological exploration work onto a track of legal regulation and thereby creating a favorable external environment for such work.

　　Delegates, comrades, the winds of the new normal have arrived. If we’re just a kite, how do we fly? If we’re an airplane, how do we fly? And if we’re an eagle, how do we fly? Personally, I believe that no matter what kind of entity we are or how we choose to fly, the key now is to “take off” ahead of time—just as the world-renowned management guru Welch put it: “Make the change before you have to.”

　　Let’s take action and wish the conference a complete success. Thank you.