The US, Japan and the European Union (EU) have jointly filed a case against China with the World Trade Organization (WTO) over trade restrictions of rare earth metal exports.

The Chinese government denied the allegations by US President Barack Obama that it had broken agreed trade rules and said that the trade restrictions were put up to protect the nation from environmental damage caused due to excessive mining.

Chinese foreign ministry spokesman Liu Weimin said the policy is in line with WTO rules.

"Exports have been stable. China will continue to export, and will manage rare earths based on WTO rules," Weimin was quoted by the BBC as saying.

China produces more than 95% of the world’s rare earth metals and has set quotas for exports of 17 rare earths, which used for making products such as smart phones and other renewable energy devices.

Obama said at a press conference on Tuesday: "If China would simply let the market work on its own we would have no objections. But their policies currently are preventing that from happening. And they go against the very rules that China agreed to follow."

The country could face sanctions based on the joint complaint that the limitations have increased the prices.