China has vehemently denied it had signed an agreement with Japan over its rare earths supply, and never ever will there be in the future.

A Japanese news agency, whose name was not published by the China Daily, reportedly flaunted that the two countries, via their representatives from the Chinese People's Association for Friendship with Foreign Countries and the Japan-China Friendship Association of Okinawa Prefecture, entered into an arrangement of a possible rare earths cooperation and partnership. The two parties met during a visit to Inner Mongolia on Jan. 18 to 21.

The Japanese news report is "seriously fraudulent... as there had been no mention of rare earths cooperation in our talks during the visit," the China Daily quoted an official from the Chinese People's Association for Friendship with Foreign Countries as saying.

The same Chinese official said their association's Okinawa counterpart had already issued a formal apology concerning the misleading reports that was published in Japan.

In the Japanese news report, datelined Jan 29, it claimed that the "two groups have signed a mutual agreement... under which they have confirmed that they will cooperate in businesses using rare earths."

"Expectations that the agreement will lead to the stable supply of the minerals, which are key to high-tech industries, are likely to grow in the Japanese industry," China Daily further quoted the Japanese report as saying.

The Japanese report said it obtained information for its report from "sources familiar with the matter."

The Chinese official, however, expressed concerns about their Japanese counterpart, the China Daily reported. No further details were mentioned.

Japan, one of the leading nations heavily invested into rare earths consumption, entered into a tiff with China when the latter started controlling its exports of rare earths sometime in 2009, citing environmental damage and the need to protect its resources. The move ultimately created a ripple effect in the global market as China controls 95 per cent of the world's rare earths supply, accounting for one-third of the world's total rare earths supply. Global consumers have complained that China's rare earths policies not only unfairly shrunk global supplies but also drove prices upward.

Prices of rare earths went 10 times higher to around 3,000 yen per tonne by the middle of 2011, though it is now trading at about 2,000 yen, the China Daily reported.

China had earlier said Chinese exporters of rare earths elements were allowed to sell only 10,546 tonnes of in the first six months of 2012, a 27 per cent reduction from the quota set for the first half of 2011. The first-round quotas, however, already account for 80 per cent of the full-year volume for 2012, the Ministry of Commerce said.

Rare earths, a group of 17 elements, are metals widely used in high-tech products ranging from flat-screen televisions to lasers and hybrid cars.

China has suspended granting new licences for rare earths prospecting and mining, including curbing production caps and export quotas, all in an effort to protect its resources. It had also imposed tougher environmental standard regulations for existing rare earths miners in order to control environmental damage.