China will reform its export of rare earths based in part on World Trade Organization rules, state media reported on Wednesday, a day after the global trade governing body ruled against its curbs on exports.

The Ministry of Commerce will study and take steps forward in rare earth export management, according to relevant laws and World Trade Organization rules, the official Xinhua news agency quoted China's vice commerce minister, Zhong Shan, as saying.

The WTO ruled on Tuesday that China broke international law when it curbed exports of coveted raw materials such as bauxite, coke and magnesium used in the production of steel, electronics and medicines.

That ruling, initiated by a complaint filed by the United States, the European Union and Mexico in 2009, was seen as a landmark that could have implications for the legality of China's rare earth export quotas.

China produces 97 percent of the world's supplies of rare earths, a group of 17 minerals used in electronics and defense and renewable energy industries.

Insisting that its high output levels are unsustainable and damaging to the environment, the central government slashed rare earth export quotas by 35 percent for the first half of 2011, building on previous quota cuts.

The decision has choked off global supplies, boosted prices and angered China's trading partners.

APPEAL EXPECTED

Rare earths are a non-renewable and important strategic resource, Zhong said at a rare earth export conference in the city of Baotou, the country's largest rare earth industrial base in the China's vast northern region of Inner Mongolia.

Strengthening and perfecting rare earth exports has great significance in protecting the natural resource environment and promoting the restructuring of industry, he said, noting that the ministry would adjust regulation of the exports in line with domestic production and consumption.

China has said it regrets the WTO's decision, insisting its export policies are based on environmental and resource protection -- a justification likely to resonate with nations such as Russia, Ukraine and India, which are also reining in resource sales.

Beijing is expected to appeal the ruling, a move that could delay any amendments to duties and quotas by several years and create pressure for a negotiated peace.

EU Trade Commissioner Karel De Gucht vowed to address the issue during a visit to Beijing next week, but said the EU, United States and Mexico could still opt for legal action if China failed to cooperate.

In a separate and lengthy English-language commentary, Xinhua said the WTO decision was nonsensical, because it was well-known that the mining and processing of raw materials was a polluting, dangerous job.

It is beyond reproach that the Chinese government reinforces the administration of the mining, refining and export of these raw materials in its own country as a responsible government for its people and the ecosystem, it wrote.

China's limits on the export of these raw materials are aimed at saving the resources for future generations. In the long run, the efforts are not only beneficial to China but also to the world, Xinhua said.

It is to be hoped that related trade parties can acknowledge China's goodwill and unremitting efforts, address trade disputes through negotiations, safeguard fair competition and jointly advance the sustainable development of human beings.

(Reporting by Michael Martina and Ben Blanchard, editing by Jane Baird)

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