While China has 53 percent of the world's rare earth deposits, it provides about 95 percent of the world's supply.

In the last 10 years, a 40,000-ton per year global market for rare earth has grown to 125,000 tons per year, according to the U.K. Times Online. By 2014 demand is predicted to reach 200,000 tons per year.

Yet China's Ministry of Industry and Information Technology has cut the country's target output from rare earth mines by 8.1 percent this year and is forcing mergers of mining companies in a bid to improve technical standards, according to the government-controlled China Mining Association.

In 1987, when rare earths started to be used in manufacturing computers and other electronic gadgets, Chinese leader Deng Xiaoping said, "The Middle East has oil, but China has rare earth."

Uses for the 15 rare earth elements vary. The permanent magnets in a three-megawatt wind turbine use about two tons of neodymium and other rare earths. Each Toyota Prius uses 25 pounds of rare earth elements. Cerium and lanthanum are used in catalytic converters for diesel engines. Compact fluorescent light bulbs use europium, terbium and yttrium.

New uses for rare earth elements continue to emerge. The Tokyo Institute of Technology's recent breakthrough in superconductivity uses rare metals that lower the friction on power lines, thus cutting electricity leakage.

Most of the world's rare earth comes from a single mine in Baotou in China's Inner Mongolia. Much of the rest comes from small, often unlicensed mines in southern China.

Outside of China, only two projects are expected to be producing rare earth in the next five years: Molycorp Minerals' Mountain Pass in California and Lynas Corporation's Mount Weld in Australia.

At a Hong Kong rare earths conference last month, foreign executives spoke about the Chinese monopoly.

"If the purpose of putting hybrid vehicles on the road is to lower our dependence on foreign oil, and all we're doing is buying cars that need Chinese rare earth materials, aren't we trading one dependence for another?" asked Mark Smith, chief executive of Molycorp Minerals, Times Online reports.

"If we don't get a couple of projects up and running there's going to be a severe shortage of rare earth in the world and all these clean energy policies aren't going to be possible," said Smith.

But readying a rare earth mine to Western environmental standards is expensive. Mostly because of lax standards, China can extract the minerals for about a third of what it would cost in the West.

Those living near China's rare earth mines and processing plants are paying a price.

Farmland surrounding a tailing lake in Baotou that stores the toxic rare earth elements before processing has been affected by seepage from the lake.

"The crops stopped growing after being watered in these fields," said Wang Cun Gang, a farmer, Times Online reports. The local council paid villagers compensation for loss of income. "They tested our water and concluded that neither people nor animals should drink it, nor is it usable for irrigation."

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