China is setting up a rare earth industry group that will lead price negotiations with foreign buyers, organisers said Tuesday, as Beijing tightens its grip on exports of the precious metals.

The China Rare Earth Industry Association is expected to be launched in May and has already recruited 93 member firms, Wang Caifeng, who will set up the group, told reporters on the sidelines of an industry forum.

Wang is a former official in the Ministry of Industry and Information Technology, one of the key government bodies overseeing the sector. The new negotiating group will have direct links to the MIIT.

"The association must reflect the calls of (Chinese) firms and will take up specific tasks in areas such as rare earth exports and foreign exchanges," she said, adding the group will lead price talks with overseas buyers.

"We will be on the front line and will cooperate with the government to serve the companies."

China produces more than 95 percent of the world's rare earths, which are critical to manufacturing 21st-century goods from iPods to low-emission cars to wind turbines.

Beijing has moved to tighten controls over the elements by cracking down on heavily polluting producers, cutting quotas for overseas shipments and hiking export taxes.

Japanese industry sources said China temporarily cut off exports earlier this year during a territorial row between Asia's two largest economies.

While China has denied halting exports, the United States last week called for Beijing not to use controls over the metals as a "weapon" to serve political interests.

Chinese Commerce Minister Chen Deming, on a visit to Washington earlier this month, denied any political motivation over rare earth exports.

Chen said Beijing was restricting mining due to environmental concerns and that Chinese companies were also affected.

The commerce ministry on Tuesday announced a preliminary rare earth export quota for next year of roughly 14,450 tonnes to allow companies to prepare for production, but emphasised it was not a full-year figure.

Wang said she believed the full-year quota for 2011 would not be reduced significantly as compared with this year and would still "be sufficient to meet domestic and international demand".

The quota this year was 30,300 tonnes, down 39 percent from 2009, according to government figures.

Wang warned that Chinese rare earth producers were facing rising competition as foreign firms were seeking supply from other countries including Mongolia, Vietnam and the United States due to China's stiffer controls over the metals.

"Competition will become more fierce and the market landscape will change in the future with the diversification of rare earth production and research and development," she said.

earlier related report

China's foreign minister to visit US next week
Beijing (AFP) Dec 28, 2010 –

China said Tuesday its foreign minister would head to the United States next week to prepare for President Hu Jintao's visit, as the two sides try to ease trade spats and tensions on the Korean peninsula.

Yang Jiechi is due in the United States from January 3 to 7 and will "exchange views on bilateral relations and issues of common interest" with US Secretary of State Hillary Clinton, foreign ministry spokeswoman Jiang Yu said.

She added the visit was in preparation for Hu's state visit to Washington on January 19.

Hu is due to hold in-depth talks with US President Barack Obama at a time of economic tensions between Washington and Beijing and shared concern over the situation in the Korean peninsula.

The United States has urged China to allow its currency to rise more quickly, claiming it is artificially undervalued, creating an unfair trade advantage.

The two sides are also locked in several trade disputes, but they are trying to find common ground on issues like North Korea.

Tensions are high on the Korean peninsula following the North's shelling last month of a South Korean border island, which killed four people, including civilians.

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