China controls world's rare earth.

China has huge deposits of rare earth ores and (until very recently) little regard for the environmental impact of mining and refining them.

The U.S. used to be the world's biggest producer of rare earths. That ended in the '90s when the Mountain Pass mining operation in California shut down due to "market pressure" (i.e., cheap Chinese product). Environmental regulations also helped seal the mine's fate; rare earth mining can produce some pretty nasty byproducts like thorium.
China's the only one country on earth where the ores are refined into the rare earth metals.

Foreign companies aren't allowed to invest in exploration and mining.
As the US government pushes the automakers to improve mileage and cut emissions, they're practically demanding carmakers produce electric or hybrid-electric vehicles. Even though the government and industry know how important these rare earths are critical to their environmental goals, they've failed to consider the potential impact of a "rare earth" gap, trusting that the free market will provide the required raw materials at a cost-effective price.
Rare earth metals needed to produce circuitry in consumer electronics, such as smartphones, MP3 music players, liquid crystal displays, and advanced battery technologies.
China is considering banning the export of yttrium (used in color TV tubes and to halt corrosion in steel), terbium (used in lasers and semi-conductors), and dysprosium (used in high temperature magnets that are required for electric motors in vehicles).

China has large natural reserves of rare earth metals, mostly in Inner Mongolia and the global dominance in this area is the result of a 20 year plan to position China as the "OPEC of rare earth metals."

By flooding the market with the resultant cheaper products, China has made it unprofitable for companies and governments to operate the costly processing required in developed countries.

Tracking the Dow,Monday,31/08/09
(3 weeks to Triple Witching)
9:30am:--A 40.0 points bearish gap down.

A selloff in overseas trading especially China with the sharpest downturns.

10:30am:--A first hour low being checkmate by a morning star.

Shanghai Composite Index fell nearly 7% Monday as participants reacted to concerns that tighter lending practices will impede growth.

11:30am:--A technical rebound still holding at bear pivot.

Crude oil is trading 3.6% lower at $70.09 per barrel.

12:30noon:--The bears are not backing-off.

Participants are still taking profits to be prudent.

1:30pm:--Sign of bullish engulfing.

Famed analyst Dick Bove said that U.S. bank earnings will be dismal for remainder of this year, with continued losses for regional banks into early 2010.
2:30pm:--A bullish spike up.

Financial Times reported that the Federal Reserve has made a $14 billion profit on loan programs that provided funds to the financial system, according to Fed officials.

3:30pm:--A powerful dragonfly doji noted.

Weakness among stocks bled into commodities pits and sent oil prices down 3.9% to $69.92 per barrel.

4:00pm:--The bulls held the last minute card at the MAV resistance waiting for a bullish September opener.
Monday being end of August month which is also the pivot day of the Dow index futures ended with a low at bull pivot.

The two-bearish low,which normally requires three to complete the bear is an exception here.

A reversal is on the way.

The China effect being the epicentre of trembling sent shockwaves throughout the world's financials.

But the ghost will be busted soon and there comes the mid-autumn lovely moon cake festival.