China is mulling new regulation to enhance supervision of the rare earths industry, Economic Information reported.

The State Council has rolled out the first draft of the regulation, which is expected to be issued in 2015, the sources cited by the newspaper said.

Under the proposal, companies that fail to meet the requirements will be penalized. The penalties include confiscations and losses of power supply.

On Aug 6, the Ministry of Industry and Information Technology released the Rare Earth Industry Entry Requirements, which require that the minimum annual production capacity should be at least 20,000 metric tons for rare earths mining companies, and 2,000 tons for rare earths metallurgical companies.

About 20 percent of the rare earths production capacity is expected to be cut.

Rare earths, a group of 17 metals, are essential in the manufacture of high-tech products ranging from smartphones and wind turbines to electric car batteries and missiles.