Japanese manufacturers have started to relocate their operations to China in an effort to resolve their lack of rare earth materials, the Oriental Morning Post reported Tuesday.

Showa Denko KK, a major rare earth alloy producer in Japan, announced recently it would increase output of its Chinese joint venture by 50 percent to 3,000 tons a year. Hitachi Metals Ltd. is also considering moving part of its Neodymium magnet production operations to China.

Since no country other than China is expected to become a major rare earth supplier before 2013, analysts believe the relocation of production by Showa Denko and Hitachi Metals may indicate the start of a massive migration of Japanese technology manufacturers to China.

Wang Guozhen, former vice chairman of China Nonferrous Metals Engineering and Design Institute, said technology exchange would play a large role in the decision to allow Japanese rare-earth product manufacturers to produce in China.

"If we can get Japan's advanced manufacturing technology of magnetic materials in return, China welcomes Japanese companies shifting their downstream manufacturing of application products," Wang said. "If [Japanese companies] only use low-end technologies [in exchange for resources], China will never do the deal.”

Although China accounts for 35 percent of the world's rare earth reserves, the country's downstream application technologies for rare earth materials currently stand at a low level of development. China has spent years trying to trade resources for technologies, but so far hasn't achieved substantial results, Wang said.