In March, the European Union, United States and Japan complained to the World Trade Organization that Beijing, which has a monopoly over world supplies of the mineral, illegally choked exports while holding down prices for domestic manufacturers.

Su Bo, a senior official at China's Ministry of Industry and Information Technology, said that higher quality demands by foreign firms and customs costs - not a decree from Beijing - partly explained the steeper prices paid by foreign companies.

"It's like an article of clothing. It could cost 10,000 yuan or 1,000 yuan, depending on the product quality," Su said, citing industry experts.

Still, Su stopped short of a full explanation for the price difference that has upset trading partners.

"We need to search for an answer, because our government has never interfered with market prices," he told a press briefing.

Rare earths are key elements in producing modern technologies from iPhones and disk drives to wind turbines, as well as components for the defence industry.

China, which accounts for about 97 percent of world output of the 17 rare earth metals, imposes strict export quotas in what it says is an effort to curtail environmental pollution and resource exhaustion.

Su sought to emphasize the environmental impact of mining by showing large photos of barren hillsides apparently stripped during the mining process.

In a similar case on raw materials in January the WTO ruled against China, saying that environmental protection is only a valid reason to curtail exports if China is giving the domestic and international markets equal treatment.

Refining rare earths requires large amounts of acid, and also produces low-level radioactive waste. Beijing is quick to note that other countries, notably the United States, have closed their own rare earths refineries, citing pollution concerns.

"The Chinese people believe, after years of supplying so much of the world's rare earths, that we deserve some appreciation," Su said.

Despite a 30,184 metric ton (33,272 ton) export quota in 2011, China says it shipped only 18,600 metric ton last year. The squeeze on supply has led, in part, to a fourfold increase in export prices over the past two years.

The government has said the quota will remain steady in 2012.

As a result of the curbs, the European Union has said foreign firms pay up to twice as much as Chinese firms for rare earth metals.

Ministry official Jiao Yinsong, said excessive extraction was leading to a depletion of China's rare earth reserves. He said China held 23 percent of known reserves, not the 36 percent that the United States has cited for China.

(Editing by Ken Wills and Jeremy Laurence)

• A Permanent Economic Emergency