Abstract: A proper evaluation of competitiveness and their differences between north China and south China 's rare earth industries is a precondition for developing China's rare earth industry. We make a comparative analysis on the rare earth industry competitiveness in North China and south China by introducing an amended Michael Porter Diamond Model. The results show that the rare earth industry has advantages in reserve, development strategy, competition within the industry, industry co-operation and clusters, knowledge absorption and innovation capacity. Rare earth industry structure of China should be upgraded by category management, policy guidance, quantity control and quality promotion. The industry of South China should focus on resource integration and human resource training, while industry of North China concentrate their efforts on industry cluster construction and industry transformation of technology achievements.