Rare-earth mining in China comes at a heavy cost for local villages
Pollution is poisoning the farms and villages of the region that processes the precious
minerals.
From the air it looks like a huge lake, fed by many tributaries, but on the ground it turns out
to be a murky expanse of water, in which no fish or algae can survive. The shore is coated
with a black crust, so thick you can walk on it. Into this huge, 10 sq km tailings pond nearby
factories discharge water loaded with chemicals used to process the 17 most sought after
minerals in the world, collectively known as rare earths.
The town of Baotou, in Inner Mongolia, is
the largest Chinese source of these strategic
elements, essential to advanced technology,
from smartphones to GPS receivers, but also
to wind farms and, above all, electric cars.
The minerals are mined at Bayan Obo,
120km farther north, then brought to Baotou
for processing.
The concentration of rare earths in the ore is
very low, so they must be separated and
purified, using hydro-metallurgical
techniques and acid baths. China accounts for 97% of global output of these precious
substances, with two-thirds produced in Baotou.
The foul waters of the tailings pond contain all sorts of toxic chemicals, but also radioactive
elements such as thorium which, if ingested, cause cancers of the pancreas and lungs, and
leukaemia. "Before the factories were built, there were just fields here as far as the eye can
see. In the place of this radioactive sludge, there were watermelons, aubergines and
tomatoes," says Li Guirong with a sigh.
Towards the end of the 1980s, Li explains, crops in nearby villages started to fail: "Plants
grew badly. They would flower all right, but sometimes there was no fruit or they were small
or smelt awful." Ten years later the villagers had to accept that vegetables simply would not
grow any longer. In the village of Xinguang Sancun – much as in all those near the Baotou
factories – farmers let some fields run wild and stopped planting anything but wheat and
corn.
A study by the municipal environmental protection agency showed that rare-earth minerals
were the source of their problems. The minerals themselves caused pollution, but also the
dozens of new factories that had sprung up around the processing facilities and a fossil-fuel
power station feeding Baotou's new industrial fabric. Residents of what was now known as
the "rare-earth capital of the world" were inhaling solvent vapour, particularly sulphuric acid,
as well as coal dust, clearly visible in the air between houses.
© Mark Johnson,
InThinking www.thinkib.net/Economics 1
Now the soil and groundwater are saturated with toxic substances. Five years ago Li had to
get rid of his sick pigs, the last survivors of a collection of cows, horses, chickens and goats,
killed off by the toxins.
The farmers have moved away. Most of the small brick houses in Xinguang Sancun, huddling
close to one another, are going to rack and ruin. In just 10 years the population has dropped
from 2,000 to 300 people.
Lu Yongqing, 56, was one of the first to go. "I couldn't feed my family any longer," he says.
He tried his luck at Baotou, working as a mason, then carrying bricks in a factory, finally
resorting to selling vegetables at local markets, with odd jobs on the side. Registered as
farmers in their identity papers, the refugees from Xinguang Sancun are treated as second-
class citizens and mercilessly exploited.
The farmers who have stayed on tend to gather near the mahjong hall. "I have aching legs,
like many of the villagers. There's a lot of diabetes, osteoporosis and chest problems. All the
families are affected by illness," says He Guixiang, 60. "I've been knocking on government
doors for nearly 20 years," she says. "To begin with I'd go every day, except Sundays."
By maintaining the pressure, the villagers have obtained the promise of financial
compensation, as yet only partly fulfilled. There has been talk of new housing, too. Neatly
arranged tower blocks have gone up a few kilometres west of their homes. They were funded
by compensation paid by Baogang to the local government.
Table 1: key economic indicators Inner Mongolia
2016 2017 2018 2019
GDP per capita ($) 14,550 11,430 13,110 13,000
Unemployment % 2.5 2.8 3.6 3.7
HDI ranking 0.733 0.730 0.736 0.737
Gini co-efficient 0.370 0.373 0.378 0.388
© Mark Johnson,
InThinking www.thinkib.net/Economics 2
Questions:
(a) Define the following terms:
i. Gross national income (GNI) [2 marks]
ii. Inflation rate [2 marks]
(b) i. Calculate the % change in GDP per capita in 2017, 2018 and 2019. [3 marks]
ii. Define Green Domestic Product. [2 marks]
(c) Describe the likely impact of the mining earths industry on the region's gross domestic
product (GDP) and green domestic product. [4 marks]
(d) Illustrate using a diagram why the mining of rare earths is an example of over production
of a demerit good. [4 marks]
(e) Explain using a diagram how the Inner Mongolian government could reduce the impact
caused by negative externalities arising from the production of rare earths. [4 marks]
(f) Using a Lorenz curve diagram, explain what happened to income inequality in Inner
Mongolia between 2016 and 2019 (Table 1). [4 marks]
(g) Using information from the text/data and your knowledge of economics, discuss the
economic impact on economic growth and development in Inner Mongolia arising from the
mining of rare earths? [15 marks]
© Mark Johnson,
InThinking www.thinkib.net/Economics 3
