Firstly the effectiveness of the VAT is doubtful...BEIJING –...

Firstly the effectiveness of the VAT is doubtful...


BEIJING – China is to introduce a specialized value-added tax invoice system for rare earth producers on Friday in an effort to curb rampant illegal mining and production of the metals. The introduction is an important regulatory step, as it will curb illegal mining and excessive
production, said Li Shanle, an official with the bureau of industry and information technology in Jiangxi province, one of the country’s major rare earth production bases. However, some industry insiders have questioned the impact of such a move. The invoice will only be effective
to regulate legal enterprises, but might not control illegal miners and producers as they do not need invoices, warned Zhang Xiaoping, general manager of the South Rare-earths Company in Dingnan county of Jiangxi
province. China is the world’s largest producer of rare earths, a group of 17 metals vital for the manufacture products ranging from smart phones,
wind turbines, electric car batteries to missiles. The country now supplies more than 90 percent of rare earth products on the global market. Lured by
high profits, illegal mining and smuggling cases continue in the country despite the government’s counter efforts.


Secondly, when additional ROW REE supplies come onboard i.e. Lynas, the "eco-balance" may change causing the Chinese to reevaluate the VAT.

With an oversupply of REE in the market place, the VAT may actually work against the Chinese.

Anyway, depending on the VAT for extra margin is walking on thin ice.