China allocates funds to support ailing rare earth industry
Beijing: China, the world's largest rare-earth exporter, on Wednesday allocated special funds to support local producers hit by its recent restrictions on exports and weak prices.
The money will be used to fund local government crackdowns on illegal mining, upgrades to enterprises' facilities for higher environmental standards, research and development and high-tech applications, the Finance Ministry said in an announcement.
China, which produces more than 95 percent of the world's rare earth - 17 elements - needed for making a range of hi-tech products strengthened controls over the production of the precious materials.
The move drew flack from several countries including US and Japan which accused it restricting exports to affect several industries which depended on it.
According to new policy, rare-earth miners that have passed China's environmental checks will be given an allowance of 1,000 yuan (USD 158.73) per tonne of their production capacity in terms of rare earth oxide.
The allowance for smelting companies will be 1,500 yuan per tonne of their production capacity, state-run Xinhua news agency reported.
Financial support to authorised high-tech application projects will be up to 20 percent of their annual investment and the total amount will not exceed 50 million yuan for a single project, it said.
The statement came after many rare earth companies, including Inner Mongolia Baotou Steel Rare-Earth Hi-Tech, China's largest rare earth producer, reported plunging profit and announced production halts to buoy prices.
The sector experienced a roller coaster ride in 2011, with the prices of some rare earth products soaring in June to a level six times higher than earlier in the year, partly as a result of the government strengthening controls on toxic mining and processing by consolidating the industry.
However, prices of the 17 minerals widely used in high-tech commodities such as smart phones and hybrid car batteries have tumbled from their dizzying heights since a speculative bubble burst last year.
The price drop has also been attributed to softening demand amid sluggish global growth and new rare earth production coming online.