A man looks toward a rare earth smelting plant as he takes a break from shoveling cast-off tailings of crushed mineral ore that contain rare earth metals in Xinguang, a village located on the outskirts of Baotou, Inner Mongolia autonomous region, on Oct 31. [Photo/Agencies]

China is spending billions of yuan buying domestically mined rare earth to build up its national strategic reserves, an official said on Friday.

Shi Yaoqiang, an official in the rare earth division of the Ministry of Industry and Information Technology, told China Daily that the nation started the purchasing program last year, mainly targeting heavy rare earth, without disclosing details such as the amount and the price.

But a senior official from Baogang Group, the parent of Baotou Steel Rare Earth Hi-Tech Co, China's largest rare earth producer by output which is involved in the government purchase of the mineral, suggested the plan involves the purchase of around 6 billion yuan ($949 million) worth of rare earth.

Baotou Steel Rare Earth announced plans on Thursday to launch a rare earth trading platform on Aug 8 to better price the resource.

Speaking on the sidelines of a national conference on supervising rare earth development, in Chenzhou, Hunan province, Shi said: "China has adopted various ways of collecting rare earths, such as building strategic reserves and purchasing rare earths for national storage."

Zhang Anwen, deputy secretary of Chinese Society of Rare Earths, added: "Rare earth storage is a strategy that many countries, such as Japan, have already been using to ensure the sustainable development of high-tech industries."

Rare earths, which are used in the high-tech and defense sectors, are generally divided into two categories-light and heavy rare earth element groups.

The State Council, first suggested establishing a national rare earth strategic reserve system, combining the commercial stockpiling with national rare earth reserve bases, in May last year.

In 2011, China established 11 State-managed rare earth mining zones in Ganzhou, Jiangxi province - an area rich in heavy rare earth resources - covering an area of 2,500 square kilometers.

Rare earths cover a group of 17 elements, including scandium and yttrium, which are key components for modern-day technologies such as hybrid electric vehicles, liquid crystal display and other high-tech products.

China's rare earth reserves account for about 23 percent of the world's total but have been excessively exploited, according to a white paper issued by the Ministry of Industry and Information Technology last month.

As the world's largest producer of rare earths, China provides more than 90 percent of supplies. Domestic reserves totaled 18.59 million metric tons in 2009.

Since 2007, China has toughened its rare earth production regulations in a bid to minimize the severe environmental impact caused by excessive exploitation.

The State Council has substantially increased environmental protection standards in the rare earth mining and smelting sector, and set a limit on exports last May.

Domestic demand for rare earths slumped last year after the government tightened controls over production and mining, as many plants closed down.

Rare earth prices have nearly halved from last year's level as global demand weakens.

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