China increased its resource tax rates on rare earth in a bid to consolidate the highly fragmented industry.

The new policy, effective April 1 this year, will increase the tax rates to 60 yuan ($9.2) per ton of light rare earth and 30 yuan ($4.6) for mid-heavy rare earth, from current 0.5-3 yuan ($0.08-$0.46) per ton.

Rare earth contains a class of 17 important chemical elements widely used to manufacture sophisticated products, including flat-screen monitors and electric car batteries.

Sun Fan, a senior analyst with the Goldstate Securities Co. Ltd., said the government needed to better protect the precious minerals and force smaller miners out of the market.

Reckless exploitation is depleting China's rare earth reserves. In 2009, China mined 97 percent of global rare earth minerals, but its reserves made up only around 36 percent of the world's total, against 43 percent in 1996.

Zhang Zhong, General Manager of Inner Mongolia Baotou Steel Rare Earth Hi-tech Co. Ltd., said the tax hike would benefit the industry over the long term, though it will boost the company's production costs by around 720 million yuan ($110.8 million) this year.

Policymakers have also spared no effort to tighten regulation. The Ministry of Environmental Protection on March 1 announced tougher rules on emission limits for producing rare earth. Before that, the Ministry of Finance ordered export tariffs be lifted on some rare earth products for 2011.