Chinese rare earth demand is likely to soar by more than 50 percent in the next five years, putting pressure on authorities to relax tough production quotas that have spurred illegal mining and rampant smuggling.

Chen Zhanheng, vice-secretary general of the Association of China Rare Earth Industry, told a conference in Shanghai on Thursday that domestic consumption was expected to rise nearly 9 percent this year to 97,700 tons. Consumption would end the decade at nearly 150,000 tons.

With China expected to export at least 30,000 tons of these minerals through official channels this year, the production cap of 105,000 tons is unlikely to satisfy total demand, meaning that there are still incentives for illegal producers.

"It is not very easy to close all illegal mines and it is very easy for illegal miners to steal from the mines. Costs are low, the mines are scattered and some local governments also protect illegal miners," said Chen.