The head of China Minmetals Corp, the country's biggest metals trading firm, called on Saturday for the government to consolidate the rare earths industry to foster competitive domestic firms, state media said.

The difficulties facing China's rare earths sector stem mainly from the fact that local authorities, the owners of such mines, tend to issue mining licenses to small local firms, the official Xinhua news agency cited Zhou Zhongshu, president of China Minmetals, as saying.

Instead, the land ministry should be in charge of issuing licenses, which should go to competitive enterprises willing to shoulder corporate social responsibility, Zhou said.

China produces about 97 percent of the global supply of the minerals used in smartphones, electric car motors and high-tech industrial equipment. Beijing cut export quotas by 40 percent last year, alarming buyers and trading partners.

Beijing announced a shake-up of the rare earths industry last month, vowing reasonable quotas on mining and exports to bring order to the small but strategic sector where its dominance has spooked foreign buyers.

Chinese rare earths traders said the announcement last month firmed up official moves already happening, and some said it would probably magnify the dominance of bigger state-owned companies in the industry.

(Reporting by Jason Subler; editing by Keiron Henderson)