Jia Yinsong, a senior official at the Ministry of Industry and Information Technology (MIIT), said at the sixth forum of the Chinese SE Industry (CREI) in Baotou that the illegal mining and sale of rare earths has almost reached the proportions of an "illegal industrial chain" .

China has only 23 percent of rare earth reserves worldwide but currently serves well over 90 percent of global demand. The mining of rare earths is considered extremely harmful to the environment.

Despite high demand, market prices for Cerium, Lanthanum and Ytterbium - representing 70 percent of the world's SE - fell 40 percent in the second half of last year. Exports of Chinese rare earths increased 2013 by 38,3 percent, but over the same period, these exports fell by 36,7 percent - a massive problem for the Chinese SE industry.

At the CREI Forum in Baotou, government officials and producers met to talk about the trends in the SE market. Above all, the price decline was an issue - the average prices for rare earths have now returned to the level of 2010.

The Chinese government expressed its regret on Thursday over the WTO's decision that China's export quotas and tariffs on rare earths, tungsten and molybdenum violate WTO rules.

The EU, Japan and the US had brought the case to the WTO claiming that China is restricting the export of its rare earth, thereby restricting other countries' access to minerals. Gan Yong, Vice Director of the Chinese Academy of Engineering and Chairman of the Chinese Rare Earth Society, said that without the management mechanisms for the Chinese government, it would be very difficult to control the SE industry. Small, illegal mines as well as extreme competition have increasingly brought the SE sector to the brink of distress in recent years.

Jia Yinsong from the SE office of MIIT found that the high profits of illegal mines had led to a clash between local governments and their respective producers. In Ganzhou alone in Jiangxi province, which is particularly rich in light rare earths, for example, investigations were launched last year against 40 officials, who are suspected of being involved in the illegal production and sale of SE.

During a three-month campaign, starting in August, 2013 had been asked to hire 126 SE companies to stop production. Additional 161 company was revoked the production license. The inspectors also seized 19.000 tons of illegally mined SE during the campaign.

In addition to combating the “illegal SE industry chain”, regulators have encouraged the establishment of six large rare earth companies. The government wants to push through a consolidation of the sector.