In the quiet heart of global manufacturing lies a category of elements that rarely grab headlines — but whose strategic importance rivals that of oil in the 20th century. These are rare earth minerals, and China’s control over their production and export is now sending tremors through boardrooms and ministries around the world.
In May, China’s rare earth exports surged by 23% to 5,864 tons — the highest monthly figure in a year — despite export curbs it imposed just weeks earlier. The irony is stark: while exports rise on paper, supply remains squeezed for specific industries. China’s April export controls, especially on high-value rare earth magnets, have left ripple effects in sectors ranging from semiconductors to electric vehicles (EVs), bringing factories in Europe and Japan to a grinding halt.
The message is clear — access to these 17 critical minerals is now as much about geopolitics as it is about economics. These materials are foundational to modern technology, underpinning everything from smartphones to solar panels, from fibre optic cables to advanced defence systems.
China isn’t just a large player in this field — it is the dominant force. It processes 90% of the world’s rare earth magnets and controls 70% of their production. And the implications of that dominance are being felt acutely, particularly in India.
India’s Urgent Pivot
Faced with the growing threat of supply throttling, India is scrambling to carve its own path. As a major importer of rare earth magnets — about 809 tonnes annually — India’s automotive and electronics industries are dangerously exposed. Since April 4, there have been virtually no magnet supplies from China. Some Indian companies’ attempts to secure shipments in May were rejected outright, despite having valid export certifications.
In response, according to the Hindu Business Line, India is turning to diplomacy and domestic self-reliance. The Indian Embassy in Beijing is coordinating meetings between industry leaders and the Chinese Ministry of Commerce, even as back-channel negotiations continue through the Chinese Embassy in India.
The clock is ticking. Supplies with Indian automakers are expected to last only until the end of June, which could adversely impact India’s budding EV industry.
Beyond Diplomacy: Building Redundancy
While diplomatic overtures are underway, New Delhi is also moving fast to structurally reduce its reliance on China. The government has launched the National Critical Mineral Mission, aimed at strengthening domestic capabilities in rare earth exploration, mining, and magnet production. Fiscal incentives for manufacturing rare earth magnets domestically are also on the table, targeting minerals like neodymium, a key input for EV motors and wind turbines.
India is also eyeing alternative suppliers. Active discussions are being held with Vietnam, Indonesia, Japan, the US, and Russia to set up alternate supply chains. Vietnam appears to be the most immediate possibility, although 90% of its rare earth production is used domestically. Indonesia may offer slightly more flexibility, but Chinese influence over supply there raises concerns.
One interim solution under consideration is importing full assemblies or sub-assemblies instead of just magnets. However, this would require significant changes to India’s quality control norms and production-linked incentive schemes, many of which demand domestic value addition as a prerequisite for financial support.
A Global Game of Leverage
China’s export restrictions are not without justification, at least from its point of view. The rare earth items in question have dual-use potential — for both civilian and military applications. Beijing has justified the curbs as a move to protect national security and comply with non-proliferation obligations.
However, the geopolitical subtext is hard to miss. These curbs were discussed during a recent phone call between Chinese President Xi Jinping and US President Donald Trump — a rare diplomatic exchange that highlights the seriousness of the issue. India, too, raised its concerns with China.
Even as China signals willingness to approve select export licenses, it’s clear that it intends to maintain tight control. A spokesperson for China’s Ministry of Commerce has stated the country is open to “enhancing communication and dialogue” on export controls — but only for compliant, peaceful usage.
The shortages are already biting. Japan’s Suzuki halted production of its Swift model. Several European semiconductor firms warn they are just weeks away from forced shutdowns.
Strategic Autonomy or Strategic Fragility?
As the world scrambles to diversify away from China, the urgency reflects a deeper truth: the global economy’s dependence on a single nation for critical inputs is not just risky — it’s unsustainable.
For India, this moment is a wake-up call. It must now balance immediate supply pressures with long-term structural reforms. A reliable rare earth ecosystem will take years to build, but the process has begun — born not out of choice, but necessity.
Whether it’s through domestic production, strategic partnerships, or reworked import rules, India’s mission is clear: reduce exposure, build resilience, and never again be left vulnerable to the whims of a geopolitical gatekeeper.
