Rare-earth firms urged to upgrade technology

New government policies expected to rejuvenate sector over longer term

The government will offer subsidies to producers of rare earths to encourage them to improve their technology levels and use environmentally friendly means of extraction, a notice said on Wednesday.

The Ministry of Finance and Ministry of Industry and Information Technology issued a circular outlining the subsidies. These include one-time awards to local governments that have completed supervisory and monitoring systems for rare earth exploration.

Companies that have met national environmental protection standards for mining and refining rare earths will also receive awards.

The government will support advanced technology programs for the industry by subsidizing up to 40 percent of the costs.

The measures will improve the industry's efficiency and standards while reducing pollution and saving energy, according to Chen Zhanheng, deputy secretary-general of the China Rare Earths Industry Association.

He said that many rare earth companies use obsolete, low-technology facilities that guzzle energy. The subsidies will not have much immediate impact, but they will rejuvenate the industry over the longer term, said Chen.

Du Shuaibing, an analyst with Baichuan Information, said the nation's rare earth industry has long been a mere resource supplier that adds little value.

With government support for improved technology and production standards, mining and processing firms will explore new applications for the metals that could raise demand, he said.

Du said many Chinese companies shun investment in rare earth technology because of a lack of protection for intellectual property rights, which often leads to copying new products or technology.

For example, China's exports of energy-saving lights using fluorescent powder derived from rare earths account for 70 to 80 percent of global sales.

But Chinese producers lack pricing power for these items because the ownership of the IPR in such lights is held abroad, said industry experts. It is important for Chinese manufactures to improve their products and branding awareness, these experts said.

With 23 percent of the world's rare earth resources, China supplies more than 90 percent of the global use of the minerals.

To protect the country's medium and heavy rare earths, the government sent a team led by the China Geological Survey to research national reserves in Ganzhou, Jiangxi province, late last month. The nation also has a resource reserve strategy for rare earths.