Gold Mining in China
College of Southern Maryland
As of 2012 China has the second largest economy in the world with a Gross Domestic Product of 7.298 trillion US dollars; that is 9.1% more that it was in 2011. The countries growth is expected to steadily increase by an average 9.5 % between 2012 -2015. This would lead many firms to believe that selling their product or even moving their firm to China would be a smart business move. However, when doing so you should know the ins and outs of the market in which you plan to do business. You should also know the economic, cultural, and political forces that you will be going up against by doing business there.
A major leader in the mining industry in China is the Zijin Mining Group. It is led by Chairman, President, and Chief Engineer Chen Jinghe. Last year it saw a 44.77% sales growth just between 2010 and 2011. Zijin had a net income of 897.44 million in 2011. They own 8 gold mines including the Zijinshan Gold Mine, which is the largest open pit in China. The opportunity for discovering and mining gold is clearly abundant in China. One major issue you will run into, as Google saw in 2007 when they attempted to open a market in China, is the government.
Chinese government has recognized the importance of a strong mineral industry for its ever growing economy. Until recently the country had very strict laws controlling the exploration, mining, and selling of gold and silver that came out of the land. Under the 1983 rule put in place by the Bank of China, all gold that was to be purchased or distributed had to be sold to the Bank of China. Exporting gold was illegal; the metal was considered “special industry.” Foreign entities and individuals were allowed to invest in mineral exploration and exploitation abiding by the Mineral Resource Law, and were subject to all other laws. While they are still subject to the Mineral Resource Law and all other laws in China, the Mineral Resource Law was amended in 1996 allowing foreign investment enterprises to be treated the same as domestic enterprises. One of China’s goals is to increase government revenues, technology, and raw materials. They have realized that allowing such investors is the best way to achieve this goal at a faster rate. However, doing business in China provides many obstacles and can be extremely risky, even more so for the mining industry. There are several rules and regulations set in place by all forms of government. China has a tri-level structured government. They include The National People’s Congress, State Administration, and Provincial Congresses. Each of these tiers has their own policies and rules that everyone must abide by, everyone including foreign businesses in China. There are several steps you must go through to mine in China. They have recently adopted a “permit” type system. Exploration Permits can be purchased by the Central or the Provincial Bureau of Land and Resources. They issue licenses in 3 year leases and they only allow your exploration in a certain area of the land (usually about 848 acres.) If a deposit is found after purchasing the Exploration Permit the licensee may apply for a 2 year renewal or retention of the exploration right within 30 days of the expiration of the previous exploration term. The Ministry of Land and Resources is in charge of approving exploitation applications. Along with those applications and permits there are several taxations through each level of government for mining minerals. According to the Environmental Protection Agency Chinese mining accounts for 85% of Chinese solid waste each year. The government taxes firms based on the level of emissions they put in the environment, which according to the statistic above, emissions for mining companies is quite substantial. A seven step process for foreign exploration investment has been formulated at the Central Government level. Those steps are: inquire...
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