China, as it gears its economy to sustain the continued global fiscal crisis along with general plans to boost domestic consumption, could transform from a major rare earths producing and exporting nation to a major consumer and importer of the precious metals essential to make high-tech gadgets and applications.

This as China on Tuesday barred a request lodged before the World Trade Organisation by the U.S., the European Union and Japan to investigate and arbitrate its curbs on exports of rare earths.

China, which started to regulate exports of its rare earths since 2009, has also started to create stockpiles of the precious metals, apart from imposing stricter standards and regulations to salvage what remains of its rare earths reserves amid continued rampant illegal mining activities.

But all these point to a bigger picture where China wants to create an entire industrial chain.

"By 2014 or 2015, China will probably be in a net import situation for certain rare earths," Mark Smith, chief executive of Colorado-based miner Molycorp, told Reuters in an interview.

"When the demand is there, that's where the supply has to go. Over 80 per cent of the magnets produced in the world come from China and that is growing just tremendously every year," Mr Smith pointed out.

China, which feeds more than 90 per cent of the world's demand for rare earths, now consumes 65 per cent of output compared to just 25 per cent a decade ago.

China's reserves of rare earths, according to the United States Geological Survey, is about 55 million tonnes, compared with Russia and the U.S. which has only 19 million tonnes and 13 million tonnes, respectively.

However, the domestic consumption for rare earths of the second-largest economy is forecast to grow 10 per cent annually in the next few years, Li Zhong, vice-president of China's biggest miner, Baotou Rare Earth. Even as China further curbs its very own exports of rare earths, it is likely that it will resort to importation, and lots of it, to address its own demand.

"Given the way demand is increasing, it is quite possible China will eventually be importing some heavy rare earth elements," an official with a rare earth magnet producer said in Reuters News.

Meanwhile, on Tuesday, China has formally rebuffed calls for a WTO dispute settlement panel between it and the three other economic leaders - the U.S., the European Union and Japan - over rare earths exports concerns.

"China said it was puzzled by the complainants' initiation of the panel process as it has no intention of protecting its domestic industry through means that would distort trade," the WTO's Dispute Settlement Body (DSB) said in a statement announcing China's objection. "It added that at the present meeting, it was not in a position to accept the establishment of a panel."

However, as per WTO rules, though China has the right to object the creation of a panel, it cannot block it again when the DSB meets on the complaint for a second time, in this case, on July 23.

The three world economic leaders first lodged their complaint in March with the WTO, claiming China is monopolising the exports of rare earths to compel foreign manufacturers to move their operations into China.

The U.S., EU and Japan requested the panel in July after unsuccessful WTO consultations with China in April.

Read more:

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