Reform Proposal for the Royalties on Mining Resources(Mainland China)

James Cheng
The State Council has distributed a circular on the reform proposal for mining resource royalties (the “Proposal”) to set up a new system that fits the specific characteristics of China and can safeguard and realize the benefits from the national mining resources and create a fair competitive environment for the mining market. The Program is highlighted below:
I. The Proposal sets forth the following reform measures:
(1) The payment for the current mine exploration and usage rights is adjusted to apply to all mining rights assigned by the state so as to realize the benefits of assigning mining rights held by the state. The sharing ratio between the central government and local governments is confirmed at 4:6.
(2) The royalties for mine exploration rights are integrated as mining fees that are dynamically adjusted based on the price movement of mineral products and economic development needs. The sharing ratio between the central and local governments is set at 2:8.
(3) The resource tax reform and the organization and implementation work shall be properly conducted when opening a mine for excavation.
(4) The current mining environmental maintenance and restoration deposit shall be adjusted as a deposit with administration oversight, uniform responsibilities and convenient usage.
II. The Proposal also puts forth relevant reform accommodation measures:
(1) Benefits from the assignment of mining rights and mining fees are included in general public budget administration and may be collectively used by all levels of financial authorities for conducting geological surveys and ecological protection and restoration of mines.
(2) The policy of converting the mine exploration and usage payments from units surveying state-owned lands to state capital is cancelled. The mine exploration and usage payments which have already been converted into state capital may not be supplemented again, and state-funded enterprises must fulfill its responsibility to protect and increase the value of state capital, as well as accept supervision by agencies that are responsible for fulfilling such state capital contributor duties.
(3) A credit disciplinary mechanism which promotes sound mining rights holders is created.
III. The Proposal stresses that all regions and relevant departments are required to enhance the organizational leadership for the reform work. Relevant departments should create interdepartmental coordination mechanisms for the reform of mining resources royalties with an emphasis on coordination, a clearly specified division of labor, the formulation of specific administrative measures for the collection and use of mining resources royalties, and a proper transition from old policies to new policies. All levels of government are required to thoroughly assume their principal responsibility for implementing organizational reform of their local mineral resource royalties system and push for all kinds of reform in a firm and stable manner.