While Japan and other major rare earth importers are criticizing China's rare earth industry policies, they are expanding cooperation in exploring these resources worldwide. According to Bloomberg, the Pentagon, along with Japan's Toyota, has inked a cooperation agreement with Canadian mining corporations, aiming to challenge China's "monopoly."

China's rare earth reserves only account for 23 percent of the global supply. In the past, it supplied the world market at cheap prices regardless of the cost to its own environment and resources.

After such unreasonable exploitation, China no longer has as many reserves as imagined, while domestic demand for rare earths is on the up. As other countries start to seek new ways to explore these resources, the international geometry of rare earth supply will change.

We need to cope with this situation as soon as possible.

There are currently doubts both at home and abroad over China's rare earth export quotas.

According to the latest data released by the Ministry of Commerce in October, China plans to export 30,996 tons of rare earths in total this year. But in the first nine months of 2012, the export volume stood at less than 33 percent of the announced annual quota. Given that the 2011 quota was not used up, this year looks likely to set the same example.

Due to declining external demand, Japanese media even mocked China for miscalculating its rare earth policy. But in the long run, once the economy improves and external demand increases, the export volume will increase again. Should China take control of the allocation quota, it may again face international criticism.

Therefore, only when China's rare earth industry develops to the extent where it can manage both its production and export volume can it consider canceling the quota policy.

Meanwhile, adjusting the rare earth resource tax is essential for the development of the industry. As the prices of rare earths are relatively low, it is time to change the taxing method from quantity calculation to price calculation, the rate of which will be dependent on market forces.

The sustainable development of the rare earth industry will rely on its upgrading, and China should avoid being over-dependent on the international market.

The strategic reserves, export and exploitation of rare earths need to be further regulated. This is key to China's future use of its dominance in rare earths.

The author is director of the China Center for Energy Economics Research at Xiamen University. opinion@globaltimes.com.cn