Production quota policy in China: Implications for sustainable supply capacity of critical minerals

Abstract

Effective evaluation facilitates the implementation of production quota policy and establishment of future policy directions. However, reliable evaluations of the long-term impacts of production quota policies on critical minerals remain scant. In this study, we first derive hypotheses about the production quota policy and sustainable supply capacity of critical minerals. Based on the theoretical analysis, we apply the generalized synthetic control method to a balanced panel of critical minerals for the years 1999–2017 to analyze the average policy effect and the effects for different minerals. Subsequently, we explain why the policy lacks lasting effects on the economic performance. Our main findings are that the effects of the production quota policy that are not obvious in the initial stage become significant at a later stage and that implementing the policy effectively can lower the supply disruption risk. With policy implementation and an increase in supervision intensity, the production quota policy has a positive impact on improving the sustainable supply capacity for critical minerals but a negative effect on profitability, thereby causing a horizontal change or even decline in the policy effects in the long term. Policy implications are proposed to enhance the sustainable supply capacity of critical minerals for China and other countries seeking supply security.