China may cut Lithium / Rare Earth exports TNR.v ILC.v CLQ.v WLC.v RM.v

world's top superpowers via aggressive trade pricing and business tactics, you have to wonder what's next. If anything, policies like this suggest a very likely next step - consolidating value-added services back home to continue fueling the growing middle class.

When you have grown to become one of the

The days of cheap Made in China goods are no more.

Today, iPhone 4 and premium products are often entirely finished in Asia.

Instead of merely outsourcing cheap labor, China is now looking at consolidating the entire process, leaving the rest of the world as pure consumers.

As value investors, this is a strong signal that commodities are where people should be focusing their attention.

After all, like the gold story we've all heard before: you can print money and issue treasury bills, but end of the day gold and hard assets will be the ones with true tangible value. You can't make this stuff out of thin air!

With this in mind, there are some lithium stories that we've been longterm followers here that deserve a second look. TNR Gold (TNR.TSX) and its spinoff company International Lithium has been moving up despite summer doldrums.

We expect as the spinoff shares are announced, more upside is to come. Who doesn't like free things? As any companies announcing dividend will see, people generally rush in right before. We recommended TNR at $0.045 at its low point in 2008 - we are saying it's a good buy once again at $0.20's.

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The Chinese overnment indicated over the weekend at the National People's Congress (NPC) in Beijing that it would curb the export of lithium and other rare earth compounds, opting instead to build a strategic reserve.

Hu'ercha, a deputy to the NPC from north China's Inner Mongolia Autonomous Region, said on the sidelines of the legislative body's annual session on Friday that China should set up a national reserve of rare earth resources and work out development strategies for rare earth-related new and high-tech industries "as soon as possible."

"The government should attach greater importance to the purchase and storage of the strategic resources," Hu'ercha stated.

Influencing the Chinese lawmakers comments is the fact that Hu'ercha is also mayor of Inner Mongolia's Baotou city, home to 75 percent of China's rare earth reserve. The Chinese politician urged the country to work out policies to support the development of rare earth-related industries and set up a development fund to strengthen basic research on rare earth.

Though China supplies about 90 percent of the world's rare earth, it has little say on international pricing due to inadequate industrial innovation and slow development of high-end products.

With China's booming growth in domestic auto sales, now ranked as the world's largest, Premier Wen may be listening to Hu'ercha and other Chinese party political backers as demand for lithium batteries and other products grow.

While lithium is not considered a rare earth and readily available, concentrations plentiful enough to mine economically are a different matter. Already companies like Korea's POSCO, the world's fourth-largest steel maker, are moving to build new sources of supply themselves while brine recovery technology lies at the forefront. POSCO recently made a rare bid to invest up to US $5 million in a junior exploration and development company's Mexico brine project if the level of lithium and other metals proved worthwhile. Chile, a hotbed oflithium exploration, is also the world's largest exporter. Pan American Lithium (TSX.V: PL), which entered into the letter of intent with POSCO, is also involved in a 100% company-owned lithium brine property in Chile. The recent earthquake in Chile delayed initial reports on Pan American's lithium property, though the Company continues to see record trading levels despite the delay.