The World Trade Organization's rejection of China's appeal concerning restrictions on exports of rare earths will foster a healthier and more market-oriented industry, because it will stimulate competitiveness and inspire innovation when companies are no longer restricted by the export quota system, said industry leaders.

Chen Zhanheng, deputy secretary-general of the China Rare Earths Industry Association, said during the annual Baotou Rare Earth Forum in Baotou, Inner Mongolia autonomous region, that "China's loss in the appeal process will prompt the nation's rare earth producers to increase output of high added-value products in a fairer and more orderly market".

Chinese manufacturers will be pushed to increase their automation levels and improve product quality to achieve large-scale production, he said.

Chen Weidong, a professor at the Law School of the University of International Business and Economics in Beijing, said the timetable for China to lift rare earth export tariffs and quotas has not been given and it is not clear whether the country will take the initiative to remove them next year.

The WTO will pursue arbitration with China if there are disputes in the execution of the WTO rules.

Li Weimin, general manager of Golden Excellence Industrial Group, which conducts research and does high-end chemical and mechanical polishing, said that in the short term, the ruling against China could be bad news since it will increase exports and intensify competition, pushing down the prices of rare earth products.

But in the long term, Chinese companies should take this chance to end protectionism and consolidate industrial structures, update technologies and develop international markets based on their strengths, said Li. "It is not enough for Chinese rare earth companies to be satisfied with what we are now. We have to grow better to compete with international giants in the rare earth technology field."

The WTO on Thursday ruled against supporting China's appeal over restrictions on exports of rare earths, along with tungsten and molybdenum. 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.

Chen of the industry association said rare earth exports this year could reach 25,000 metric tons worth $400 million, a sharp slide from the previous level. Rare earth prices may decline further if illegal mining persists, he said.

Overcapacity and illegal mining in the south have been main contributors to the declining rare earth prices, he said. This month, the government accelerated consolidation in the rare earth industry by giving its approval for three major producers to become conglomerates by year-end to consolidate resources, combat smuggling and alleviate overcapacity.

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