In recent discussions on amending the Mineral Resources Law, it has been proposed that “the state shall implement a paid-use system for mineral resources, including paid transfer of mining rights and paid extraction of mineral resources.” Regarding the paid transfer of mining rights mentioned here, if it refers solely to usage fees for mining rights, there is no doubt about its validity. However, if it also includes the payment for the mining rights themselves (or what is known as the transfer fee), this raises some questions. In fact, this practice—currently widely adopted by local governments—is worthy of close attention.
　　1. Treating mining rights fees as compensation for the paid use of mineral resources is inconsistent with current regulations.
　　Article 5 of the Mineral Resources Law stipulates: “The exploitation of mineral resources must be accompanied by the payment of resource taxes and resource compensation fees in accordance with relevant state regulations.” This is the specific content of the paid use of mineral resources.
　　Article 5 of the Mineral Resources Law also stipulates: “The State shall implement a system under which exploration rights and mining rights are obtained against payment” (hereinafter referred to as “mining rights,” with exploration rights and mining rights collectively termed “mining rights”). It further specifies that “obtaining rights against payment” includes both mining rights usage fees and the purchase price for mining rights. With regard to the purchase price for mining rights, the State provides the following specific interpretation: “The purchase price for exploration rights refers to the fee collected from the holder of exploration rights in accordance with regulations when the State transfers exploration rights—formed through its own capital investment in exploration—to the holder of exploration rights” (the same interpretation applies to the purchase price for mining rights).
　　 Clearly, this is not a paid use of mineral resources; rather, it is the capital interest that the state, as the funder of mineral exploration, has acquired. Its essence is: “Whoever invests reaps the benefits.”
　　II. The paid use of mineral resources is closely linked to the consideration for mining rights.
　　1. Mining rights are derived from and dependent upon the ownership of mineral resources. The consideration paid for mining rights represents an appreciation based on the property value of the mineral resource ownership itself, rather than the mineral resource ownership’s property value per se.
　　2. The property value of mineral resource ownership also depends on the operation of mining rights. Since most mineral resources are buried underground, their existence, quantity, and quality remain unknown without exploration—and much less their value can be determined. Therefore, the property value of mineral resources can only be realized through the exercise of mining rights.
　　3. The property value of mineral resource ownership, together with the value generated by mining rights, collectively constitute the value of mineral resource assets. Both types of value have mineral resources as their object, and the boundaries between these two values are not entirely clear—often, one can only determine the other once the first has been established.
　　III. There is an important distinction between the paid use of mineral resources and the consideration for mining rights.
　　1. Different sources of value: The paid use of mineral resources involves collecting the property value associated with ownership rights over those resources. This value is naturally formed—its worth arises precisely from the scarcity and utility of the resources themselves. In contrast, the value embodied in mining rights fees stems from the living and materialized labor invested by humans and is created through investment.
　　2. The collection processes differ: For paid use of mineral resources, the fee is collected at the stage of mineral product sales—meaning users pay after they have already begun using the resources. In contrast, the payment for mining rights is collected at the time of acquisition—meaning the payment is made upfront, and then the resources are used.
　　3. The methods of collection differ: Paid use of mineral resources involves annual compensation that corresponds to the consumption of those resources—compensation equals the amount consumed. In contrast, the fee for mining rights is paid either in one lump sum or in installments over several years of use.
　　4. Different stability of returns: The paid use of mineral resources, once the charging standards are set, remains relatively stable and is unaffected by the performance of the operator; in contrast, the price of mining rights is determined based on an appraisal as the reserve price and is shaped by market forces, thus being subject to both natural and operational risks and exhibiting poorer stability.
　　5. The entities benefiting differ: For the paid use of mineral resources, the collecting entity is the state monopoly; whereas for mining rights fees, the collecting entities are diverse—those who invest are the ones who benefit.
　　IV. An Analysis of the Motivations Behind Merging Mineral Rights Fees with Charges for the Paid Use of Mineral Resources
　　Indirectly taking advantage of the paid use of mineral resources by collecting fees for mining rights is a practice pioneered by local governments and endorsed by the Ministry of Natural Resources. The primary driving force behind this practice lies in the sharp rise in mineral prices and the dramatic increase in profits from mineral products, while the standards for collecting resource compensation fees—intended to reflect the paid use of mineral resources—are still inadequate. Under these circumstances, it becomes highly convenient to secure a portion of the ownership rights over mineral resources by means of transferring mining rights fees, especially given that mining rights and mineral resource ownership often overlap as joint components of mineral resource assets with rather blurred boundaries. At the same time, this kind of appropriation also facilitates the recovery of some of the excessive profits from mining capital, thereby ensuring that all factors involved have an equal right to share in the revenues generated by mineral products.
　　Moreover, the current regulations themselves do not provide a comprehensive framework for the revenue generated from mining rights. For instance, certain mining rights—such as those for sand and gravel—that do not require exploration do not involve investment-generated revenues; instead, the proceeds from their transfer largely reflect the differential rent derived from the mineral resources themselves. Yet, the regulations do not explicitly address this point. As a result, local governments can easily treat the fees paid for mining rights as part of the compensation for the paid use of mineral resources.
　　V. The drawbacks arising from encroaching upon ownership rights of mineral resources by collecting fees for mining rights.
　　1. By using mining rights fees as a disguised means of implementing paid use of mineral resources, we are effectively turning the paid use of mineral resources into paid acquisition—switching from “use first, pay later” to “pay first, use later,” in other words, selling the resources themselves. If the mining rights being transferred allow for 20 years of extraction, it means that the mineral resources within those 20 years are sold to the mining rights holder all at once. For the government currently transferring these mining rights, this practice amounts to “overdrawing” on future revenues—allowing current generations to consume benefits that should rightfully belong to future generations. Such an approach will inevitably lead to short-termism and a rush to exploit resources before they’re fully exhausted, thereby undermining the sustainable utilization of mineral resources.
　　2. By squeezing the rights to mineral resource ownership through the levying of fees for mining rights, the government will inevitably become eager to monopolize mining rights and directly use fiscal investment to engage in mineral exploration. This, in turn, leads to a blurring of lines between government and enterprises and a mixing of governmental and state-owned asset management functions. As a result, the government finds itself acting simultaneously as both the administrative manager of mining rights—serving as both referee and player—thus creating an unfair competitive environment and hindering the entry of social capital into the field of mineral exploration.
　　3. When the government directly funds mineral exploration activities rather than funding enterprises to carry out such exploration, it inevitably leads to inefficiency in exploration efforts. This is because government-funded exploration lacks the incentives and constraints needed to reduce costs and mitigate risks. Under this funding-based approach, once a mineral deposit is discovered, the project is credited with success; if no deposit is found, the expenditure can be written off at any time. As a result, there is neither pressure nor motivation driving these activities, yet the government possesses immense capacity to absorb risk. For geological exploration—where it is crucial to constantly guard against both natural and market risks—this is the most ill-suited institutional framework and mechanism.
　　VI. Countermeasures and Recommendations
　　Ensure that the rights representing the paid use of mineral resources are fully and adequately collected, leaving no room for underpayment or preferential treatment in mining rights fees. To this end, we recommend:
　　1. Convert the mineral resource compensation fee into a resource revenue tax, clearly defining its status as equivalent to absolute ground rent, and raise the collection standards to ensure full compliance. At the same time, shift the collection method from being based on the sales revenue of mineral products to being levied according to the value of the actual reserves of mineral resources consumed. To achieve this, it is essential to conduct research and address the following issues:
　　1) Determine mineral resource prices. The state shall periodically issue these prices based on the supply and demand situation of mineral resources and their resource conditions. The pricing principle is that all factors should receive equal shares of the revenue.
　　2) The standards for determining and calculating mineral resource reserves are primarily based on industrial indicators. Taking the nationally approved standards as a coefficient of 1, any values exceeding or falling below the nationally prescribed standards shall be adjusted using coefficients less than or greater than 1, respectively.
　　Only by doing so can enterprises that consume mineral resources treat them as their own, which will in turn promote the protection and rational utilization of mineral resources.
　　2. The resource tax is clearly a differential income collected based on the natural abundance differences among mineral resources—akin to differential ground rent—and can be levied according to market prices. However, given the hidden nature of mineral resources, this differential income cannot be exclusively appropriated by the resource owners alone; investors who contribute capital for exploration and development should also participate in the distribution. In terms of collection, the resource tax should be regarded as a tool for moderating excessive profits in the mining industry.
　　3. It should be clearly recognized that the consideration for mining rights represents the equity generated by investments in mineral exploration. Although this consideration is indeed a form of property income, it is not an inherently existing asset—it is rather the outcome of human productive activities. Consequently, exploration activities conducted with the explicit purpose of acquiring mining rights should be classified as commercial mineral exploration, and it is imperative to separate government administration from enterprise operations and to separate government functions from state-owned assets management. Governments at all levels must clearly separate their administrative oversight of mining rights from their involvement in the commercial operation of such rights. For the exploration of mineral resources, specialized resource-exploration companies should be established, operating entirely as enterprises and competing fairly with other market players. The government may participate as an investor to maintain control over mining rights.
　　4. For mining rights that do not require exploration, the revenue from their transfer should not be referred to as “price”; rather, it should be termed “revenue from mineral resources.” A combination of one-time collection and gradual collection based on consumption can be adopted. The one-time collection represents differential rent, while the gradual collection represents absolute rent.