Beijing (AsiaNews/Agencies) – A carpet of black dust covers what once were fields of corn and wheat. A 10-kilometre wide tailing lake of polluted brownish water stands nearby and could poison the Yellow River. Local levels of radioactivity are higher than average and residents are dying from cancer. Welcome to Baotou, Inner Mongolia, a city sitting on rich deposits of rare earths, whose production has spelled death and destruction for so many of its residents.

Inner Mongolia accounts for about 87 per cent of China's total proven reserves of rare earths. Beijing has developed the resource, supplying until recently 97 per cent of the world’s rare earths needs. It has done so however without protecting the environment.

Rare earths are a group of 17 chemical elements that are essential to modern high technology goods in sectors like electronics, nuclear production and alternative energy machines (hybrid cars and wind turbines), telecommunications and the airspace industry.

In March 2010, China announced it would cut back exports by 40 per cent to protect the environment and preserve its reserves for domestic use.

This led to protests around the world, as rare earth users complained about China’s use of its near monopoly status to favour domestic firms.

In October 2010, Beijing went further and announced that it would be decreasing its exports of rare-earth materials by 90 per cent.

Inevitably, prices escalated dramatically. For instance, the price of neodymium jumped from just under US$ 30/kg in November 2009 to over US$ 100/kg just over a year later.

According to China's General Administration of Customs, rare earths exports fell by 29 per cent in January 2011 over a year earlier. At the same time, total exports in January 2011 reached US$ 148.3 million, 376 per cent higher compared with the corresponding period of last year.

Baotou has luxury hotels, high-end restaurants, trendy bars and upmarket saunas that cater to a new breed of entrepreneurs, making fortunes out of the global scramble for rare earths. However, just a few kilometres away, people have to wear masks to protect themselves from a black dust that makes them cough and poisons their lungs. Street vendors sell masks at two yuan a piece.

Perhaps hundreds of local workshops are involved in refining the minerals using acid and a mixture of chemicals. The toxic waste generated by the process is then discharged 24 hours a day in the nearby tailing lake, seven million tonnes of it a year in all.

A kilometre from the lake and eight from Baotou lays the village of Dalahai. Five more villages are cluster nearby. They are all known as cancer villages because the local rate of cancer is many times the national average. Stomachaches are commonplace and people start losing their teeth when they are just 35 or 40 years of age.

A local resident, Jia Yunxia, told the South China Morning Post that the government promised them compensation, but that he had not received a single yuan and cannot afford moving elsewhere.

The Yellow River runs only 10 kilometres south from the tailing lake. In 2005, official studies by experts like Xu Guangxian, former president of the Chinese Chemical Society, found that the area is tainted with thorium, a source of radioactive contamination in the Baotou area and the Yellow River, which provides drinking water for 150 million people. The results were kept from the public for years.

Even though the government has cut exports, ways have been found to get around the restrictions. For example, a foreign company can always find a Chinese partner. This explains why even though exports of neodymium went down, the production and exports of 1.5kg neodymium bricks packed into 250kg blue barrels went up. Neodymium is used in making magnets that drive turbines.

Exports of rare earths from Inner Mongolia were down 83.8 per cent in January from a year earlier and yet its exports of rare earth products surged by 91.4 per cent year on year.

Illegal mining by crime syndicates is another way to export rare earths. In recent months, the authorities have had to use helicopters to crack down on illegal mines in northern Guangdong, home to most of southern China's illegal rare-earth mines. At least 100 owners and managers of unlicensed refineries have been arrested.

The government wants to review rare earths mining and refining two years from now. It plans to introduce a stringent environmental protection regime. However, it is unwilling to accept criticism.

For Beijing, the growth in rare earths use was made possible by its low cost thanks to Chinese overproduction. Without that, it might have been more difficult to justify their use.