why china has to cont' its cap on rare earth

Hi All,

This is a very smart strategy for China to cap the export of rare earth to the rest of the world. The main drive behind this is the shifting its resources to allow for an increase in high tech manufacturing Jobs in China.

So why would China relax its cap on exporting of rare earth, after all you get much much more money (in terms of taxes and jobs) to be exporting value added material than just raw material. They can do this because they currently have 97% of the world's rare earth which are an essential ingredient in high tech products. Which other raw material is predominantly own by a country and is necessary in the production of high tech products? None!

This is just my thoughts but I believe rare earth has huge upside potential in the short to medium term. I do not see China's cap on rare earth to be abolished. No incentive for them to do so and it would be economically costly for them not to do this.

I have attached an article below which confirms my thoughts for everybody's perusal.
====================================================
ARTICLE DATED 7TH JAN 2011

With the monopoly powers of china manufacturing units of firms involved in rare earth business have relocated to China from US. General Electric (USA), Rhodia Group (France), New Materials technology (Canada), Diaodo Electronics (Japan), are among many who have relocated to China. Beijing has cajoled these firms through the instruments of Quotas and Tax Breaks. Since Quotas only apply to raw material and not semi-finished or finished rare earth products, foreign companies have created joint ventures with local Chinese enterprises, noted Institute for Defence Studies and analyses in its recent report.

Tax Breaks are another indication. China levies a duty of 25 percent on export of rare earth whereas it gives a rebate of 17 per cent on value added tax for firms based in China. This relocation has allowed an increase in high-class manufacturing jobs in China. This has also led to very high consumption of rare earths within China.

"The future of rare earth is great. What is happening is the prices are going through the roof because the Chinese do control the supply, but it is pure simple capitalistic economics now," Rogers told an Indian business television channel ET Now.

Known for his investment fascination for China, Rogers said that rare earth makes great investing sense because the bulk of the metal is produced by China.

"Well, China does produce 97 percent of rare earth. Uranium is not a rare earth, but they do produce a lot of uranium as well," he said.
==========================================================