China has approved the State-owned metal producer China Minmetals Corporation to form a rare earth conglomerate to further consolidate resources in the industry.

The company will lead the restructuring of the rare earth industries in Southern China, namely the provinces of Hunan, Yunnan, Jiangxi, Fujian and Guangdong and Guangxi Zhuang autonomous region, Chinese media reported on Thursday.

The approval was part of Beijing's plan to better develop and integrate the country's rare earth industry through mergers and acquisitions by encouraging six major resource companies to form conglomerates.

China Minmetals Corporation was the first company to operate rare earth business in China.

The Ministry of Industry and Information Technology earlier gave three other rare earth producers, namely Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co, Xiamen Tungsten Co Ltd, and Aluminum Corporation of China, the green light to form conglomerates.

China supplies 90 percent of the global demand but is facing serious problem of overcapacity.