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Rare earth resources "forced" to deep processing
In 2007, the rare earth industry witnessed a major transformation. The Chinese government shifted its approach from a directive-based policy to a more enforceable framework, introducing a 10% export tariff on rare earth products and accelerating the elimination of outdated, energy-intensive, and polluting production facilities. It also placed restrictions on foreign investment in domestic rare earth extraction. These measures aimed to address long-standing issues such as resource overexploitation, unregulated development, environmental degradation, and inefficient utilization.
According to the Inner Mongolia Rare Earth Industry Association, China has long been the world's largest producer of rare earths, accounting for over 90% of global output for years. However, much of these resources were exported in raw or low-value forms, allowing foreign companies to process them abroad, leading to significant resource loss and environmental damage. This cycle of low prices and cutthroat competition had become a recurring issue. But 2007 marked a turning point. Export controls were tightened, growth was curbed, and efforts were made to protect resources and boost industry efficiency. As a result, export prices rose significantly, the market became more regulated, and environmental protection saw initial success. More companies began focusing on deep processing, signaling a shift toward higher value-added activities.
Currently, regions rich in rare earth resources are intensifying their efforts to develop local industries by expanding downstream chains and attracting both domestic and foreign investments. For instance, Baotou introduced policies to strengthen the supply advantage of rare earth materials and promote industrial development. Companies within the Baotou Hi-Tech Zone can access raw materials at preferential prices, aiming to build specialized industrial bases in areas like permanent magnets, hydrogen storage, polishing, and lighting materials.
Jiangxi implemented a "restricted export, incentive input" strategy, prioritizing the use of resources for technological advancement and encouraging foreign collaboration in deep processing. Other provinces like Sichuan and Hunan have also outlined plans to extend their rare earth industrial chains and establish clusters.
Globally, China’s rare earth resources and labor advantages have drawn attention from foreign industries. With limited exports, many foreign firms have moved their deep-processing operations to China. In 2007, a large share of LCD monitors, notebooks, and TVs were produced in mainland China. The growing auto industry also spurred foreign companies to set up manufacturing units for DC motors and exhaust systems. Japanese and European firms, such as TDK, Showa Denko, VAC, and NEOREM, established bases in China, further boosting the internationalization of China’s rare earth sector.
Domestic companies have also accelerated their move toward deep processing. Leading enterprises like Qingdao Yikesi, Inner Mongolia Leopold, Shanghai Zhengcheng, and Jiangxi Hongyuan have invested in advanced technologies, achieving industrialization of products like rare earth isoprene rubber, Ni-MH batteries, nanocrystalline magnets, and thermal stabilizers. These developments reflect a broader trend of innovation and value creation in the rare earth industry.