The commerce ministry did not specifically comment on reports that Beijing had halted shipments of the minerals, vital for the production of everything from iPods to hybrid cars, to both Japanese and US firms as a retaliatory move.

But it lashed out at a report in the official China Daily, citing an unnamed official from the same ministry, that Beijing would cut quotas by up to 30 percent next year to prevent over-exploitation.

"Reports published by individual media that China will continue to cut rare earth export quotas for next year are groundless and purely wrong," the ministry said in a statement faxed to AFP.

"China will continue to supply the world with rare earths," it said.

"Meanwhile, in order to protect exhaustible resources and sustainable development, China will also continue to impose restrictions on rare earths mining, production and export."

The commerce ministry said such measures did not contravene World Trade Organisation rules.

Rare earths -- a group of 17 elements -- are used in high-tech products ranging from flat-screen televisions to lasers to hybrid cars, and China controls more than 95 percent of the global market.

China has cut rare earth exports by five to 10 percent a year since 2006 as demand and prices soar.

In 2011, the government will set "reasonable" export quotas "based on a comprehensive study of rare earths output, domestic and overseas demand and needs for sustainable development," the ministry said.

Tokyo has accused China of restricting rare earths shipments to Japanese firms, amid a bitter spat between Asia's top two economies sparked by a maritime incident in disputed waters six weeks ago.

Beijing has previously denied any embargo, but a Japanese trade ministry survey released this month found that all 31 Japanese companies handling rare earths had reported disruption to shipments.

On Tuesday, the New York Times reported that China had halted some rare earths shipments to the United States in response to a US probe into alleged Chinese subsidies for its green technology sector.

"The embargo is expanding" beyond Japan, the newspaper quoted an anonymous industry official as saying.

earlier related report
China halting key minerals to US: report
Washington (AFP) Oct 19, 2010 - China has halted some shipments to the United States of rare minerals vital to industry due to anger over a US probe, seizing on a tactic first used against Japan, The New York Times said Tuesday.

The newspaper, quoting industry officials, said that China quietly stopped shipments of so-called rare earths earlier this week in response to the US investigation into alleged Chinese subsidies into its green technology sector.

"The embargo is expanding" beyond Japan, the newspaper quoted an anonymous industry official as saying.

Major Japanese and US companies all make use of rare earths, a group of 17 elements in high-tech products from iPods to hybrid cars. China controls more than 95 percent of the global market.

Japanese industry said that Beijing took similar action last month after Tokyo seized the captain of a Chinese fishing boat in waters disputed between the two countries.

Japan eventually released the captain, triggering criticism by some conservative lawmakers who accused Prime Minister Naoto Kan's left-leaning government of emboldening China.

The row over rare earths has led to calls in major economies to diversity away from China, fearing that Beijing will increasingly wield its economic clout for political reasons.

The United States announced Friday that it would investigate charges that China has handed out hundreds of billions of dollars in illegal subsidies in a bid to dominate the fast-growing green-energy sector.

The probe comes after the United Steelworkers union petitioned trade officials to investigate practices it claims contravene World Trade Organization rules and cost American jobs.

China denied the charges and hit back that the United States was also subsidizing green firms. China has also denied any official campaign to restrict exports of rare earths, suggesting that companies acted on their own.

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