THE villagers at Xinwuli, Hunan, direct us through a 1000-year-old maze of cobblestone paths to the family home of one of their minor celebrities, Li Zi'an. Li's mother, a dignified woman named Chen, shuffles out on her spindly legs to greet us.

"I don't know what my son is doing, only that he's working in Guangzhou and this spring festival he didn't come home," she says.

If Li's mother knows any more, then she's not letting on. Her 42-year-old son was one of four men convicted of uranium trafficking in a Guangzhou court in August. But other helpful villagers know exactly what he was up to.

"If you're interested in uranium you have to go to Goat River village," says one. "I don't know today's price, but if you go to that village they'll certainly find some for you. All the mines are up there."

The villagers at Goat River (not its real name) certainly did know how to find uranium, as detailed in the weekend's Age. They were just waiting for a well-heeled customer.

And on Wednesday morning, Prime Minister Kevin Rudd arrives in Beijing, a little over a year since Australia and China ratified nuclear safeguard agreements enabling Australian companies to export uranium to China.

BHP Billiton and Rio Tinto are negotiating to supply Chinese customers but are yet to sign any contracts. BHP has no available capacity until it expands Olympic Dam in South Australia - which the company says contains an astonishing 40% of the world's known uranium resources. Likewise, Rio first needs to expand its ERA Ranger mine in Kakadu National Park, which already accounts for 10% of the world's annual production.

A combined BHP-Rio could be powerful enough to set the terms of the world market, much as it would hope to do with iron ore. Both companies are eager to sell to China for the same reasons that Chinese companies are desperate to buy from them.

The "spot" market price for yellow cake (refined uranium oxide), in so far as there is one, rose from $US7 per kg to $US151 in the seven years to July, according to UxC, before receding to $US71 last week. Long term contract prices were steady at about $US95 last year, which was about 10 times the average price during the 1990s.

Buyers are hoarding and prices are soaring because the world has almost finished dismantling its excess nuclear weapons. By 2013, Russia will have pulled 500 tonnes of highly enriched uranium from 20,000 war heads and sold them to American nuclear power plants - the energy equivalent of 1.3 billion tonnes of oil.

While the post-cold war supply surge is coming to an end, governments everywhere are reconsidering and expanding nuclear power programs to reduce their reliance on fossil fuels and alleviate climate change. China, which is letting its nuclear weapons arsenal stagnate, has commissioned eight new nuclear power plants and will need to build dozens more if it is to meet its nuclear power target of 5% of overall electricity demand by 2020.

The Australia-China safeguards agreements rely on monitoring by the International Atomic Energy Agency, but it has little chance of keeping track of a system that even the Chinese Government can't fully control.

Brief visits to two large decommissioned mine sites, code-named 711 and 712, and villages such as Xinwuli, reveal nuclear production run by unaccountable officials and naive peasants who will trade their lives to escape poverty. The Guangzhou court case was said to involve a Hong Kong businessman. The villagers at Goat River sold their uranium to a Chenzhou trader and didn't know where it went after that.

A Chinese security official told BusinessDay he was concerned about China's black market uranium passing to domestic terrorist groups. A senior Israeli official said he was worried about it passing to the Middle East.

Most likely, given the technology required to enrich uranium into a fissile state, it was simply being sold back into the state system. But that is hardly an advertisement for integrity and accountability.

The most powerful of China's overlapping nuclear companies and regulators is the China National Nuclear Corporation, which used to be military-controlled and has its share of corruption problems. On Thursday, a company spokesman explained why he would not answer BusinessDay's questions: "If you want to report on the future of China's nuclear power industry, then that's a good thing. But if you want to report about the mines, or mine managers, then that could only cause a loss of face."

Villagers at Goat River say recent attention from Beijing regulators has not killed the illegal industry but merely raised the local bribe price.

Australia's future uranium exports and the Rudd Labor Government are obviously vulnerable to attack. If the Chinese Government has failed to safely regulate the mining, upstream processing and trading of uranium, then its assurances about controlling enriched uranium are open to question.

"There's really no accountability whatsoever on our uranium exports, it could easily end up in missiles or on the Chinese black market," says Jim Green, an Australian anti-nuclear campaigner with Friends of the Earth.

Neither the Australian Government nor Australia's mining companies mentioned China's nuclear safety problems when the safeguards agreements were signed and then ratified. But the companies, at least, have a fair idea of the choice they face.

Either they quietly use their market leverage to help China move towards Australian-style health, environmental and governance standards or one day the Australian public will shut their exports down.