China's leading producer of rare earth metals has been given government approval to build a strategic reserve, exacerbating concerns that Beijing is tightening its grip on the valuable minerals, needed to produce green and high-technology products.

China supplies about 95 per cent of the global market for rare earths, used to produce everything from hybrid cars to iPod music players.

Baotou Rare Earth said in a statement to the Shanghai stock exchange that it had gained approval from the regional government of Inner Mongolia to build 10 reserve facilities capable of storing more than 200,000 tonnes of rare earth oxides.

Over the past three years, China has steadily cut export quotas for rare earth elements, saying it needs additional supplies in order to develop the domestic clean energy and high-tech sectors.

This has fed foreign suspicions that Beijing plans global domination of rare earths. Deng Xiaoping, the former Chinese leader, said in 1992 that, while the Middle East had oil, China had rare earths. However, foreign and Chinese industry executives doubt Beijing's goal is to create an Opec-like price cartel.

China recently eased its export quotas, boosting the allowance for the first half of the year to 16,300 tonnes of rare earth elements, up by more than 8 per cent compared with the same period in 2009.

After flooding the world market with cheap rare earths for more than a decade, Beijing now wants to ensure that it has the commodities it needs to feed its own ambitions to build advanced and green technology industries such as electric vehicles

The move to create a strategic reserve at a cost of about $3bn could also boost the cost of rare earths. Prices have risen about fivefold since 2000, but the financial and economic crisis has put pressure on the price of some of them.