China's first rare earths product exchange is scheduled to start operations in October, a senior official said on Friday.

"As the largest producer and exporter of rare earths, China faces many problems, including smuggling and illegal exploration. This has led to an awkward situation where we have the resources but not pricing rights," said Gu Ming, general manager of the Baotou Rare Earths Product Exchange, during an industry forum in Baotou, the Inner Mongolia autonomous region.

The exchange was initiated by the Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Co Ltd, the world's largest producer of rare earths.

The company won approval from the regional government in May 2011 and registered the exchange with another 11 rare earths companies with registration capital of 120 million ($19.5 million) in August 2012.

According to Gu, the online trading platform will hold a test run in September. The exchange provides spot and forward trading modes for companies, excluding futures.

"The exchange will also provide inventory, financing and logistic services for traders, aiming at building a national pricing and service center," Gu said.