China's regulation of its rare-earth minerals industry protects the environment, prevents over exploitation of the its resource, and promotes the development of new energy industries across the globe, experts say.

Rare earths have become increasingly important in the manufacture of new energy products like electric-car batteries, wind turbines and other sophisticated products including flat-screen monitors, missiles and aerospace alloys.

The exhaustion of China's rare earths would be a major blow to the world's green energy industry, so China must regulate to curb excessive and disorderly mining of the non-renewable resource, the latest edition of the Xinhua News Agency's finance magazine - Economy & Nation Weekly - quoted Lin Donglu, secretary general of the Chinese Society of Rare Earths, as saying Sunday.

China's regulation of its rare earth industry includes reducing export quotas, cracking down on illegal mining and smuggling, no further issuing of mining licenses and the imposing of production caps.

The time is right to form an international competition mechanism for the rare earth industry to ensure sustainable development of new energy technologies, Lin said, noting that China's rare earth reserves accounted for one third of the world's total in 2009.

However, China's rare earths output hit 120,000 tonnes last year, 97 percent of the world's total, according to a report by Marc Humphries, an energy policy analyst at the United States Congressional Research Service.

While complaining about China's rare earth export quotas, western countries are reluctant to establish rare earth-related high-tech enterprises in China, according to Wang Hongqian, general manager of the China Nonferrous Metal Industry's Foreign Engineering and Construction Co. Limited (NFC).

For western countries, the real worry is that the relevant high-tech industries may shift to China as a consequence of China's regulation of exports, said Lin Donglu.

China announced guidelines earlier this month to encourage merger and acquisition in the rare earth sector, to enhance industry consolidation.

The final say is with the State Council, China's cabinet, Wang Hongqian said, adding that the government will treat light rare earths differently from medium and heavy rare earths.

State-owned enterprises should take the lead in mining and smelting rare earths using advanced technologies, Wang added.

China plans to cut the number of rare earth firms from the current 90 to 20 by 2015, according to media reports.