Conference : China mining 2002
venue: Chongqing, China

By: Ms. Shou Jiahua Vice Minister of Land and Resources
Oct. 21, 2002

Dear chairman, representatives, friends, ladies and gentlemen:

　　In the golden season of autumn, we meet with our old and new friends here in the famous mountainous city of China, Chongqing, to discuss the development of China mining industry and to promote its further reform and opening up. I am very pleased and exited to be here.

　　This is the forth session of the conference after its birth in 1999. We are delighted to see that China Mining International Conference has been established as a brand, which acts as not only the window of China mining reform but also the platform for exchange and communication between domestic and foreign mining industries. It is the platform that provides us the opportunity to acquaint so many friends who are attentive and supportive to the reform and development of China mining industry. Here, on behalf of the Ministry of Land and Resources, I would like to extend my cordial thankfulness to all participants and present the report entitled “WTO Entry: Opportunities, Challenges and Countermeasures of China Mining Industry”.

　　Opportunities

　　Domestic demands on mineral resources are continually increasing

　　China is a developing country and the progress of industrialization is speeding up, so the demands on mineral resources post drastic increase. Since 1990s, the domestic consumption of copper has increased by 110%, aluminum 323%, zinc 270%, non-ferrous metals 260% and oil almost doubled. However, owning to the comparably low efficiency of comprehensive utilization, the problem of resources waste is serious and the increase of reserve could not keep up with that of consumption. After China’s entry to WTO, the rational allocation of resources in the world will provide unprecedented opportunity to the globalization of resources in China and promote a healthy development of China mining industry.

　　After twenty years’ practice of reform and opening up, China has become an important production and consumption country of mineral products. Production and consumption volumes of many major mineral products of China account for big percentages in the world totals. According to the Ninth Ten-Year Plan and Development Outline for the Long-Term Objective in 2010, the GNP in 2010 shall double on the basis of 2000 figure. To achieve this objective, the mining industry is demanded to provide more mineral energy and raw materials.

　　Investment environment of mining industry in China is getting mature

　　During the twenty years development, reform and opening up, the socialist market economy of China has been initially set up, the fundamental function of the market in dispose resources is being enhanced, an open-mode economy is developing rapidly and the economy ties with other countries are strengthening.

　　This year, the domestic industry has post a strong performance continually with quick increase of production and stable rising of sales. The development of light industry, textile, tobacco, petrochemistry, metallurgy, non-ferrous metals and power generation has been stepped up. Industries such as coal, mechanism, electronics, pharmacy and building materials have registered high-speed increase. In addition, direct foreign investment to China has kept strong performance. By the end of August, the number of newly approved foreign ventures reached 21470, increased by 31.36%; foreign capital in contract reached 62.307 billion US dollars, increased by 42.42%; foreign capital actually used reached 34.442 billion US dollars, increased by 25.52%.

　　During the first year after WTO entry, Chinese government has kept its promises. The tariff on minerals and their manufactured products has been lowered to 6.9% from 2001’s 8.76%. By the end of the first half year, the importing value of mineral products has reached 29.213 billion US dollars, increasing 7.27% than last year and exporting value has reached 14.771 billion US dollars, increasing 2.85%. It is unquestionable that there will be enormous space for the development of China mining industry and the investment environment is getting mature.

　　Challenges

　　The structure of our mining industry needs to be adjusted

　　Tariff reduction and non-tariff wall elimination bought about by WTO entry will lead to adverse impact on many domestic mining enterprises that have been protected by the planned economy for long. In the coal industry, the average labour productivity of key state-owned coal mines is only 1/64 of Australia’s, 1/71 of America’s and 1/22 of South Africa’s. In petrochemistry, our enterprises are big in quantity but small in production scale. The manufacturing techniques and equipments are backward. In addition, the product structure is unreasonable. In non-ferrous metal industry, the problems are low production centralization rate, high production cost, unreasonable product structure and high-tech and high precision products cannot meet the demand the national economy. In iron and steel industry, high-grade iron ore mainly depends on importing and thus the production cost increases. Therefore, it is very urgent to adjust the structure of mining enterprises.

　　The government shall shoulder more responsibility in policy regulation

　　Chinese government has promised “to keep the international rules and to open the market” in the service trade and trade-related investment activities the field of mineral resources management after WTO entry. The key points are revising and improving polices and regulation according to international rules, exercising administrative reform, realizing the transparency, consistency and foreseeable practice of current regulations, reducing administrative intervention and establishing modern economy system under the basic principles of WTO. In keeping the above promise, Chinese government faces following transforms: to eliminate the conflicts of policies from different departments and to thoroughly weed out policies and regulation in contradiction to international laws; to strengthen legal system construction, to act administration in strict accordance with laws and to keep international practice, to avoid operation lacking transparency, to raise working efficiency under the requirement of “quick, simple, expedite, truthful and accurate” and to provide excellent, considerate and satisfactory service; to establish in the world a good image for Chinese government administration and to realize scientific, democratic, lawful and modern government management.

　　I fully agree with what Mike Moore, the ex-director general of WTO said, after WTO entry, what China most need is the consciousness on rules of the whole society instead of funds, technology or talents. I believe, rules consciousness is the inherent demand of the development of market economy and only when it becomes the moral criterion, can the social and economy orders meeting the requirement of market economy be completely set up.

　　Countermeasures

　　To sort out laws and regulations, to found the basis for WTO entry

　　After WTO entry, Chinese government has primarily completed the sorting out and revision of related laws and regulations, making legal guarantee on its fulfillment of promises. In nearly 30 departments of the State Council, about 2300 pieces of law documents are sorted out (350 or more pieces are related to land and resources administration), among which 830 pieces are to be terminated (about 115 pieces are related to land and resources administration) and 325 pieces are to be revised (about 46 pieces are related to land and resources administration).

　　To regulate the orders of resources management and to improve the environment for foreign investments

　　After WTO entry, it is one of our most important obligations to regulate the orders of resources management and to improve the environment for foreign investments. On the basis of a thorough check of exploration and mining licenses, we inflicted severe punishment on illegal exploration and mining activities. Up to now, 53645 cases of mining without license and 194 cases of using exploration license as mining license have been found and punished; 29 exploration licenses and 2261 mining licenses have been revoked; 3023 cases of mining outside the boundary identified in the licenses have been found and punished; 1048 persons have been given criminal sanctions. The improvement of orders of mineral resources management forms good foundation for the improvement of foreign investment environment.

　　To enhance the construction of mining rights market and to create a fair environment for the market

　　Mineral resources used to be allocated through mining right approval, which resulted not only in the low efficiency of resources utilization but also in unfairness and discrimination. After WTO entry, we strengthened the construction of mining right market and try to make it fair and public thought the market’s function of allocating resources. Minister of Land and Resources Mr. Tian Fengshan has pointed out that administrative approval of mining rights shall be stopped in principle and mining rights shall be assigned through bidding and auction like operative land. Until the end of this July, 22 provinces have started to assign mining rights through bidding and auction, 37 kinds of minerals are involved.

　　To advance the reform on mineral exploration systems, to separate enterprises and administrative departments in this field

　　Ministry of Land and Resources has formally set up China Geological Survey in 1999. Geological results with basic, commonweal and strategic importance in projects invested by the central government are now shared in the society. The working objectives are to be oriented by demand other than supply. In old systems, all geological work were supported by the state treasury. Now those with basic, commonweal and strategic importance shall be separate with commercial ones. The working policy shall be converted from mainly depending on domestic resources to actively participating international cooperation and promoting the globalization of resources disposition. The working method shall be converted from mainly depending on traditional theories and techniques to making wider use of modern science and technologies and advancing resources to develop in an informatized and comprehensive way. The reform on geological working system and conversion of working method are the requirement of our own reform as well as that of WTO entry.

　　To take an active and down-to-earth working attitude and strive for the settlement of hot and difficult issues

　　Ministry of Land and Resources keeps a close relationship with foreign enterprises and mining groups of Australia and Canada and makes consistence efforts to settling hot and difficult issues of foreign investment in mining industry. Recently, the National People’s Congress carried out a national inspection over the implementation of “Mineral Resources Law of the People’s Republic of China” and decided to put the revision of this law into agenda. I believe with the improvement of laws and regulations on mineral resources management, many key problems will be settled properly. Before the revision of the law, Ministry of Land and Resources shall explain and dispose some hot issues appropriately.

　　a. Priority
　　I think there exists some misunderstanding caused by cultural difference. All investors in mineral resources exploration strive for the rewards in developing these mineral resources. As long as an exploration licensee meets the requirements prescribed by laws, he may obtain the exclusive mining right of the resources found by his exploration activity. Exploration licensees also have the right to transfer their exploration rights. These rights of exploration licensees cannot be deprived except otherwise in conformity with laws. If somebody violates the above regulation, a lawsuit may be filed according to administrative procedure law and this will be identified in the revised “Mineral Resources Law of the People’s Republic of China”.

　　b. Access of geological data
　　“Provisional Regulations for Commonweal Geological Data to Be Provided for Public Use” promulgated in June 2000 specifies the definition, publicizing department and administrative organ of commonweal geological data, simplifying the procedure of borrowing and granting foreign investors national treatment in referring these data. This year “Regulations for Administrating Geological Data” was enacted and the rules for implementing these regulations is in discuss. Confidentiality of geological data is the issue of great concern and we are taking active negotiation with relevant department regarding it, preparing to provide commonweal geological data for use through publication.

　　c. “Enclave”
　　“Enclave”, referring to the existence of other people’s mining right in one licensee’s mining area, is an individual problem in our license assignment management. With the organizational reform coming in place, people’s government on all levels shall conduct lawful administration in accordance with the rules of WTO. Moreover, on the basis of sorting out exploration and mining licenses, the approval right of 34 mineral products used to be entrusted to municipal and county governments shall be resumed by land and resources department on provincial level. I believe the problem of “Enclave” will solved completely.

　　d. Assessment
　　It has been decided that all domestic or foreign institutions meeting the qualifications prescribed by land and resources administration departments once approved by administrative departments can apply for doing the business of mining right assessment. We will carry out further international cooperation to learn about the assessment rules in international practice and to improve the technology related. After WTO entry, for the purpose of introducing international practice and building a healthy market for mining right assessment, the Ministry of Land and Resources has decided to replace the confirmation system of mining right assessment result by a record system.

　　Ladies and gentlemen, the WTO entry brings about challenges as well as opportunities and we must grasp the opportunities and facing the challenges. Finally I would like to quote two proverbs of China. One is “a promise must be kept”. We will be faithful to the promises made in entering WTO and make our utmost efforts. The other is “facts speak sounder than words”. Through many years’ efforts, we are pleased to see that there have been examples for successful foreign investment in China such as the coalmine operated by Asia-American Coal Corporation (United States) and the gold mine operated by China Mining Co., Ltd(Australia) in Shan Xi. I believe there will be more and more such examples.

　　Honored representatives, thank you very much for your kind attention and support to China mining industry and wish you a most enjoyable stay in the culturally ancient “Mountainous City”!

Thank you!