How Beijing Tamed a Lawless Industry and Gained Global Influence

As recently as 2010, few industries were as lawless, and yet as central to the global economy, as China’s production of rare earth metals.

Consignments of rare earths frequently changed hands for sacks of Chinese currency: The rule of thumb was that a cubic foot of tightly packed 100-renminbi bills was worth $350,000. At a warehouse in Guangzhou, near Hong Kong, acid was used illegally to extract rare earths, and the residue, faintly radioactive, was dumped into the municipal sewage. The gang operating the warehouse brought in foreign buyers in the trunks of cars to keep its location a secret.

But since then, a crackdown by Chinese law enforcement and the government’s consolidation of the industry have allowed China to seize control over the country’s supply of minerals and curb its excesses.

“Gone is the Wild West, go-go mentality where the environment was given short shrift — now it is much more controlled,” said David Abraham, a rare earth industry consultant.

The environmental costs of unregulated mining and refining were high for many years. In southern China, forested hillsides and emerald rice fields were turned into expanses of toxic mud, as Chinese crime syndicates hired laborers to dig up ore and process it in unlined acid pits.

In northern China, groundwater laced with the industry’s radioactive waste began seeping toward the Yellow River. Thousands of square miles of pasture were closed to grazing because of contamination by radioactive dust from refineries, which was blamed for the deaths of thousands of goats.