China will introduce effective Friday the issuance of a rare earths specialised value-added tax invoice system to its industry producers and miners in a bid to curb the rampant illegal mining of rare earths in its country, amid plans of building a national rare earths inventory reserve to regulate price fluctuations.

Li Shanle, an official connected with the Bureau of Industry and Information Technology in Jiangxi province, said the implementation of the rare earths value-added tax invoice is a crucial step to control the rare earth minerals sector's output as well as restrain illegal sales and smuggling activities. Jiangxi is one of China's major rare earths production hubs.

But some miners questioned the effectiveness of the mechanism as it only targets China's legitimate rare earths producers.

China is the dominant supplier of rare earths to the global market, accounting for more than 95 per cent of the world's demand. Some of its enterprising citizens have joined the bandwagon for the sector lured by high profits, albeit through the back door.

Because it has been unofficially accounted, the output of these illegal Chinese rare earths miners have put a dent into the sector, resulting to large price fluctuations in 2011.

To curb price fluctuations and hopefully put a stop to the rampant illegal mining, China plans to set up a national inventory of rare earths reserve that will engage strategic buying and selling of the 17 precious rare earths, state-backed China Securities Journal reported on Friday.

The paper said the Ministry of Industry and Information Technology (MIIT) of China is the head steering government agency of the plan. The ultimate goal of the national reserve leads to the creation of a rare earth trading platform, where China expects to be participated by the legitimate miners.

Quoting unidentified sources, China Securities Journal said the MIIT is currently conducting a series of talks with the country's rare earths enterprises. A detailed project plan towards the creation and management of the national reserve will be formed after.

Specific to the national reserve's goal is to encourage business to buy and reserve rare earths when prices fall and hit a certain level, and then later on sell when prices jump and reach a set price.