II. Principles and Targets of Development

1. Fundamental Principles

- Adhering to environmental protection and resource conservation. The state will implementstricter standards for ecological protection and protective exploitation policies concerning rareearth resources, improve relevant laws and regulations on the industry's administration, andcrack down on all violations of laws and regulations according to law.

- Adhering to total-amount control and optimizing reserves. The state will quicken its steps toimplement the conglomerate strategy, promote structural adjustment of the industry, activelypush forward technological innovation, strictly control the mining, smelting and separatingcapacities, phase out outdated capacity, and further increase the concentration rate of theindustry.

- Adhering to giving consideration to both the domestic and international markets andresources. The state will take synchronized administrative measures on rare earth mining,production and export, and encourage international exchanges and cooperation.

- Adhering to coordinated development of local economy and society. The state will strive tocorrectly handle the relations between local and overall development and current and long-term development, and maintain a normal order of industrial development.

2. Main Targets

Within a short period of time, the state will strive to establish a regulated and orderly system ofrare earth resource exploitation, smelting and separating, and market circulation, andeffectively control the disorderly exploitation of resource, deterioration of the ecologicalenvironment, blind expansion of production, and rampant smuggling; increase the recyclingrate of rare earth resources, the recycling rate of ore dressing recovery, and the rate ofcomprehensive utilization, enforce effective control over the intensity of resource exploitation,and restore the reserve-extraction ratio to a proper level. It will make sure the discharge ofwaste water and gas and slag meet the established standards, and effectively restore theecological environment in key areas. It will push forward merger and reorganization in the rareearth industry, and develop large-scale, highly efficient, and clean production enterprises. Newproduct development and new technology application will be accelerated. On this basis, thestate will further improve related policies and laws and regulations regarding the rare earthindustry, gradually establish a unified, standardized, and highly efficient administrative systemfor the industry, and develop a sustainable and healthy development pattern featuring rationalmining, orderly production, efficient utilization, advanced technology and intensivedevelopment.