China's precious metal reserves are shrinking at an alarming rate. Over-exploitation and cut-throat competition in exportation, on the other hand, have driven prices considerably low in the international market.

Rare earth, for example, witnessed a reserves decline from 88 percent of the world's total more than ten years ago to 52 percent in 2008, while export increased almost 10 times.

China is rich in precious metal resources -- its wolfram, indium and rare earth reserves rank first in the world and the productions account for 80 percent of the world's total.

These unrecyclable metals are mainly used in weapon manufacturing, aeronautics and astronautics and the information industry; many nations actively import and store them for strategic considerations.

According to statistics from the Ministry of Land and Resources, by the year 2020, only 6 out of the 45 major mineral resources can meet the demand in China. If exploitation continues at the current rate, in 30 to 50 years China will be unable to boast leading places in wolfram, indium and rare earth reserves.

While exports of wolfram, indium, rare earth and other precious resources keep rocketing, prices decreased by 30 to 40 percent. In 2005, prices for rare earth only equaled 64 percent of that in 1990, with profits hovering between 1 to 5 percent. The international price of indium, of which 80 percent of the world's total output is from China, is only US$1,000 per kilogram, far below the US$3,000 to US$5,000 reasonable prices.

But recently the United States and the European Union jointly filed a suit with the WTO over China's restrictions on exports of precious metals, claiming their interests are hurt by the restrictive measures taken by China.

It's the first time the United States has filed a suit against China with the WTO since the Obama administration took office.

A representative from the Ministry of Commerce said China's export policies concerning precious metals are drafted to protect the environment and natural resources in accordance with WTO rules. Restrictive measures are especially necessary for these strategic metals during the global recession, the representative added.

Mei Xinyu, a researcher with the Ministry of Commerce, said according to UN documents, every country has the right to control the exploitation of its resources, and the action by the United States and European Union is breaking the basic norms of international society and ignoring a country's sovereignty.

Last week, the Ministry of Industry and Information Technology issued new regulations on raw materials. The regulations show China will further strengthen supervision over exports of precious metals to guarantee national security and economic security.

But some experienced insiders said that for something as strategically valuable as precious metals, restrictions on exploitation and export are not enough. In the long run, a strategic stocking system on the national level and matching policies should be established.

(chinadaily.com.cn July 7, 2009)