Study On The Influence Of Rare Earth Regulation Policy On Profit And Risks Of Rare Earth Enterprises

Rare earth is a new strategic industry,but there comes out a series of problems these years in ourcountry, like serious price deviation from value, persistent illegal mining, large resources wastes, rampantsmugglings, deteriorative environment, etc. Therefore, our country has introduced a series of polices tocontrol the rare earth industry, which are put into greater effect on companies’ profits and risks in the wayof price, cost, asset, and so on. Studies on those effects reflect much of research value, because rare earthcompanies are both the targets and the result takers during policy implementation.Baotou Rare Earth is the largest rare earth producers and also the benchmark company in our rareearth industry, so the control policy impacts it undertakes are pretty representative and typical, andanalyzing those impacts on Baotou’s profits and risks due to changes of rare earth control policies can helpunderstand the whole business situation for our national rare earth industry. On a grand scale, it can reflectthe control policies’ implementation level for targets and effects, the differences between which can befound and further oriented as the strong basis for subsequent policy adjustments; on a micro level, thedifferences between rare earth companies’ business situation and industrial control policy targets can betracked out as the lighthouse for companies to correct their own business.2006-2011is the period our national rare earth control policies are intensively published. This articledivides those lately policies into5categories, each of which is analyzed on its background and expectedimpacts onto rare earth companies. Takes Baotou rare earth company as the example, with its financial datafiltered out from2005–2012, in which control policies have gone through changes, this article usesfinancial indexes and regression analysis to study how control policies affect Baotou’s profiting power andquality, and how the polices are transferred to companies. Moreover, the impacts from control policy onBaotou’s risks are explored mainly through operating difference ratio, leverage contribution ratio and thetrend variation of traditional cash flow items. Based on the above analysis and the policy targets, this articleforecasts the future trend for rare earth policies and provides constructive suggestions for Baotou’s futuredevelopment.