The government will increase exploration and production quotas for rare earth companies by 10 percent this year to bring output in line with the sector's capacity, a senior official said.
Huang Libin, an official at the Ministry of Industry and Information Technology, gave the figure during Thursday's half-year briefing.
The increase is also a response to rapid industrial development in the country, including rare earth-based new materials and environmental protection and conservation products, which are spurring longer-term demand for rare earths, he said.
Rare earths are a group of minerals that have many uses in high-technology sectors such as defense and renewable energy. China supplies 90 percent of the global demand.
Consolidation and reform in the domestic rare earth industry over the past three years have led to the closure of unlicensed producers and those who were violating regulations, said the official.
It also drove smaller refiners into mergers with large ones such as Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co.
Giving more quotas to the large companies will allow them to replace those that have closed.
Huang said that quotas might grow further as regulation of the industry improves amid growing market demand. But he said the industry is still too large.
Nationwide, the total quota for production is 105,000 metric tons this year. BaoSteel, the country's largest producer, got a production quota of 59,500 metric tons for light rare earths, an increase of nearly 20 percent from last year.
Du Shuaibing, an analyst at natural resources consultancy BaiChuan Information, said that the quota increase is mostly intended to allow surviving companies to use their production capacity.
The World Trade Organization in late March ruled that China had acted inconsistently with WTO rules with regard to export measures imposed on rare earths.
Du said China's export quota system would remain in place until 2015. In the past few years, global demand for rare earths was relatively low, and many quota allocations were not used.
Earlier this month, the Ministry of Commerce announced the second batch of rare earth export quotas for 2014. So far, it has not shown any signs of expanding the quotas this year.
