China's rare earth industry has made progress since the State Council implemented a series of new policies, and more actions will be taken to ensure the industry's healthy development, a government official said Thursday.

Through joint efforts from several government departments, the rare earth industry has created a standardized management system, said Chen Yanhai, director of the Raw Materials Department under the Ministry of Industry and Information Technology (MIIT), at the fifth China Baotou Rare Earth Industry Forum.

The forum kicked off on Thursday in the city of Baotou in north China's Inner Mongolia Autonomous Region, which accounts for more than half of the world's output of light rare earth metals.

"Although some progress has been achieved, there are still some deep-seated problems that have yet to be solved. The situation of illegal exploitation and mining remain serious," Chen said.

Statistics from the MIIT show that illegal mining of rare earth amounted to over 40,000 tonnes in 2012, and illegal smelting separation of rare earth products totaled 50,000 tonnes.

Meanwhile, overcapacity, a low proportion of high-end products, smuggling and pollution still hamper the development of the rare earth industry.

Chen said industrial management standards and regulations, as well as pollutant emission standards and rare earth resource taxes, have been put into place to ensure the industry's healthy development, since a series of policies was implemented two years ago.

"Industrial order has been regulated following crackdowns on illegal activity in recent years," according to Chen.

Fourteen illegal mines were shut down and 14 rare earth smuggling cases involving 400 million yuan ($65 million) were investigated from 2011 to 2012, and over 4 billion yuan has been spent to strengthen environmental protection investigations in the sector.

A campaign to cut down on the illegal exploitation, production and transportation of rare earth metals will be run by the MIIT, Ministry of Public Security, Ministry of Environmental Protection and Ministry of Land and Resources from August 15 to November 15.

China's rare earth industry has witnessed a surge in the past two years as industrial scale and technology have been enhanced and the quality of industrial operations has been improved.

In 2011 and 2013, the country's rare earth industry raked in 15.9 billion and 10.8 billion yuan in profits, respectively. In the first half of 2013, the industry has produced 35,000 tonnes of smelting separation products, creating a profit of two billion yuan.

With prices on the rise and supplies tight in the international market, foreign countries, including the United States, Australia, Russia, India, Brazil and Thailand, have once again begun exploiting and producing rare earth themselves in recent years.

According to incomplete data, the capacity of rare earth from foreign countries has reached nearly 70,000 tonnes. But a diversified rare earth supply structure is forming since these nations resumed production, said Zhang Anwen, deputy secretary-general of the China Rare Earth Industry Association, at the forum.

"The output of each rare earth mine in the United States, Australia and Russia is often less than 25,000 tonnes. Although Vietnam, India, Canada and South Africa have launched some rare earth projects, they need plenty of time to put them into operation and realize the capacity," said Zhang Zhong, president of Inner Mongolia Baotou Steel Rare-Earth (Group) Hi-tech Co, China's top rare earth producer.

Industrial insiders said that global rare earth supplies continue to rely heavily on China, which has driven consumption of rare earth resources and environmental problems in the country.

"If the diversified supply structure can be formed, it will benefit the sustainable exploitation of rare earth and prolong the service time of Chinese rare earth mines, but the competition that China faces in the future will increase as well," Zhang added.

"The international competitiveness of China's rare earth is being weakened, as the competitiveness mainly exists in the light rare earth section," said Ma Rongzhang, secretary-general of the China Rare Earth Industry Association, adding that as the the foreign market's capacity expands in the future, Chinese light rare earth producers will face great pressure.

However, some insiders still hold a positive attitude toward the new challenge, as heavy rare earth still dominates the overall global market.

Moreover, low production costs in domestic light rare earth enterprises will also help China hold a dominant position, they believe.