China Defends Control of Rare Earth Exports as Move to Protect Environment

China defended its controls on exports of rare earth after Japanese officials raised concerns about supplies of the raw materials used in the manufacture of products from cell phones to radar.

Restrictions on the rare earth industry will help protect the environment, the state-run Xinhua News Agency cited Chen Deming, China’s commerce minister, as saying yesterday at a media briefing during China-Japan economic talks in Beijing.

China cut its export quotas for rare earth by 72 percent for the second half of this year, according to data from the Ministry of Commerce on July 8. Shipments will be capped at 7,976 metric tons, down from 28,417 tons for the same period a year ago.

Japanese officials told their counterparts that the lower quotas could have a major effect on global industry, and demanded early action on easing them, said Satoru Sato, press secretary for visiting Foreign Minister Katsuya Okada. Japan urged China to make ample supplies of rare earths available, Nikkei English News reported earlier today.

The U.S. Trade Representative is also targeting the restrictions for a potential trade case. The U.S. has asked business groups and labor unions to provide evidence that China is hoarding these elements for a case that might be filed at the World Trade Organization.

‘Limits Inevitable’

“Chinese officials said the export limits were inevitable and that they don’t expect any problems with the WTO,” Japan’s Sato said.

China controls 97 percent of production of the materials, known as rare earth elements, giving it “market power” over the U.S., the Government Accountability Office said in a report in April. China restricts exports of the elements through quotas and export taxes of as much as 25 percent, the GAO said.

In order to protect the environment, China had no choice but to take such measures, Chen said, according to Xinhua. The restriction policy will also have an adverse impact on the Chinese market, where parts for Japanese products are assembled, Chen added.

‘Minimize Pollution’

“China’s policy to restrict its rare earths mining and exports is out of concern for the environment and to minimize pollution,” Liu Aisheng, director of the Chinese Society of Rare Earths, said in an interview with Bloomberg News in June. “It also encourages the domestic industry to effectively use its own resources and discourages exports of raw materials, such as ore and mixed ore, without much processing.”

Rare earths are a group of 17 chemically similar metallic elements, including lanthanum, cerium, neodymium and europium. The U.S. was self-sufficient in the materials until the mid- 1980s, when lower labor and regulatory costs helped China’s climb to dominance, the U.S. Geological Survey said in a report.

--Feiwen Rong. With reporting by Xiao Yu in and Toru Fujioka in Beijing, and Masaki Kondo in Tokyo. Editors: Paul Tighe, Jim McDonald

To contact the reporter on this story: Feiwen Rong in Beijing at fron2@bloomberg.net

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