INTERVIEW - China: no fast change in rare earth export

GENEVA Fri Oct 22, 2010 3:40pm IST

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GENEVA (Reuters) - China's new five-year-plan will not bring any rapid change in export quotas for rare earth metals required worldwide for high-tech products, a senior Chinese trade official said on Thursday.

Sun Zhenyu, ambassador to the World Trade Organization, told Reuters Insider that China's own stocks of the rare metals, for which it is the dominant supplier, were depleting fast and that Beijing had to conserve them.

"I think there will be probably not a very quick change in the export quota mechanism of rare earths," Sun said in an interview on the trade implications of the five-year-plan, unveiled this month.

For full Insider interview go to link.reuters.com/paz59p

The plan is the blueprint for the five years from 2011 for what will become the world's biggest economy as China shifts the emphasis to domestic consumption from exports.

China's policy on rare earths -- used to make parts for vehicles, computers, mobile phones and missiles -- has been at the top of the trade agenda since reports that China had halted shipments to Japan during a territorial dispute.

Chinese export restrictions on rare earths have already been challenged at the WTO by the United States, European Union and Mexico, which say the policy helps Chinese producers that use the minerals at the expense of foreign competitors.

The Commerce Ministry denied on Wednesday a report that the government planned to slash export quotas next year.

China, which now provides more than 90 percent of the world's supplies of rare earths, says it has to conserve them for environmental reasons and because they are disappearing.

Sun said China's resources had fallen to 30 percent of the world total from 33 percent in 1996 and would last only another 15-20 years.

Curtailing production would affect both foreign customers and domestic producers, he said.

Rising prices and concerns about Chinese supply have prompted companies in the United States and other countries to reopen mines that had been considered uneconomic.

U.S. EXPORTS

"We would like that our partners would also start working on some kind of production of rare earths of their own resources," Sun said. "So we are very glad to see that some of our trading partners are starting to do so."

Sun also said he was hopeful the United States would soon relax restrictions on high-tech products that have both commercial and military applications -- a long-standing request of Beijing.

Under the new five-year-plan China will develop several strategic industries such as alternative energy and new materials, for which it will need to import high-tech equipment from the U.S. and elsewhere.

Sun said there were positive signs that the U.S. business community was pushing the government to relax controls on this dual-use technology and that eventually China would be able to buy these goods from America.

"That will have a major impact on the trade balance between China and the U.S.," Sun said.

The United States has an advantage in high-tech goods, but they made up a relatively small proportion of U.S. exports to China. Easing restrictions could boost U.S. exports to China by $90 billion a year, he said.

President Barack Obama has called for the restrictions to be streamlined as part of his plan to double U.S. exports.

(Editing by Stephanie Nebehay)

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