China is planning to set up a national rare earth purchase-reserve mechanism to curb price fluctuations, according to a report published Friday in China Securities Journal.

The Ministry of Industry and Information Technology is leading the related research, the report said. A rare earth trading platform will also be established on the basis of the mechanism for open trading by enterprises.

The report quoted unidentified sources as saying that a detailed project plan will be formed after further communication with rare earth enterprises. When prices fall to a certain level, enterprises will be required to purchase and reserve rare earths according to the mechanism; when prices rise to a set price, enterprises will be required to sell.

In May last year, the State Council, China's Cabinet, issued directions on promoting the healthy development of the rare earth industry, calling for the establishment of a strategic reserve system, including both state and corporate reserves, product reserves and resource reserves.

Comments from Galaxy Securities said drastic price fluctuations in 2011 seriously hurt the industry and brought difficulties in regulating it. The reserve mechanism would be helpful in controlling rare earth price fluctuations and illegal mining.

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