The Chinese government is to set up a group of large companies to better exploit mineral resources and reduce production accidents, said Vice Premier Zeng Peiyan here Tuesday.

In a report to the Standing Committee of the National People's Congress (NPC), Zeng said the government would foster large conglomerates in different regions, industries and ownerships.

"We'll support large mineral businesses in coalitions, and acquisitions and mergers, and the reorganization of small and medium-sized counterparts," said Zeng, without specifying what constituted a conglomerate.

It is expected the production of large coal mines will account for more than 60 percent of total national mineral output.

China has tens of thousands of mineral businesses, the majority being small and medium-sized ones. Nearly 20,000 mines have been ordered to stop production for improvements and another 8,000 closed for unauthorized exploration and safety risks since 2005.

Zeng promised to reduce the number of serious mining accidents and allocate more funds to technological upgrading of mines.

He said the government would expand mineral exploration as current reserves and efficiency fail to meet demand.

The government had earmarked 2 billion yuan (25.6 million U.S. dollars) this year to set up a central geological survey fund, engaged in more than 120 projects so far.

Surveys have been conducted in 159 of the 171 known reserves. China had 12 percent of the world's total mineral reserves, ranking third after the United States and Russia.

But rapid economic growth and low mineral reserves per capita have resulted in huge demand and a domestic supply shortage.

In 2005, China consumed 330 million tons of oil, while domestic output was just 180 million tones; the consumption of high grade iron reached 530 million tons, far exceeding its 260 million tons produced.

"The gap had to be filled by imports," said Zeng. "This demand-supply imbalance has caused price hikes." In the past four years, the price of copper had increased by 20 percent, and iron by 160 percent due to domestic shortage.

Meanwhile, Chinese companies had little say in international mineral prices as they often competed against each other instead of working together.

Zeng highlighted the need to improve prospecting as recent surveys failed to find more reserves in more than 70 percent of mineral deposits, and more than half of the mineral categories had seen reserves shrink.

Source: Xinhua