China suddenly further tightened its grip on the one big power source that runs many critical areas of the modern economy, queering the pitch even more for other countries that were already deeply unsettled by Trump's relentless barrage of punitive tariffs.
China suddenly further tightened its grip on the one big power source that runs many critical areas of the modern economy, queering the pitch even more for other countries that were already deeply unsettled by Trump's relentless barrage of punitive tariffs.
Under the newly issued rules, exporters will require official licencing to ship technologies and equipment used in rare earth mining, smelting, separation, magnet manufacture, recycling and even maintenance, repair or upgrades of rare earth production lines.
The measures also restrict overseas cooperation. Chinese firms and foreign partners now must seek approval to engage in rare earth related projects abroad.
Why China's new curbs matter for India more is because this time, China has demanded that India provide assurances -- through end-user certificates -- that heavy rare earth magnets supplied to India won’t be diverted to the US or for weapons manufacture.
Indian firms have submitted such certificates, but New Delhi has not formally accepted all of China’s conditions.
Beijing has framed these curbs as necessary to prevent the diversion of rare earths into sensitive or "dual-use" applications, especially in defence or semiconductor sectors.
This latest move is a continuation of China’s stepped approach in this regard. Xi & Co first began imposing export licencing and restrictions on certain minerals in July 2023, and has since progressively broadened the scope of controlled items.
Chinese dominance over magnet production and reluctance to publicly share export data further enhances its bargaining position.
Supply lines jam
While diplomatic overtures between India and China appeared to ease tensions earlier, China has continued to withhold approvals on magnet export applications from Indian firms -- particularly for heavy rare earth magnets.
In August this year, Beijing lifted export curbs on a select list of items -- including rare earth magnets destined for India -- in response to Indian diplomatic requests. However, according to analysts covered by The Economic Times, rather ..
Rare earth elements (REEs), though not extremely rare in nature, are difficult to process economically. The value lies not just in mining but in refining, separation, alloying and magnet manufacture. While China produces 60–70 % of global raw rare earths, its share of magnet production and processing is even larger—some estimates place it at over 90 %, an ET report says.
These elements power critical technologies, including high-performance motors, wind turbines, sophisticated electronics, semiconductors, precision instruments, defence systems and electric vehicles, among others. Disruption in their supply or manufacturing could ripple across multiple sectors.
Indian Industry stares at the unknown
China’s export curbs have already begun to strain industries in India, and supply bottlenecks have sprung up across sectors. Below is a breakdown of the key effects and responses:
Automobiles including EVs: Indian EV makers face delays and shortages of rare earth magnets. China's export curbs have created supply constraints, prompting ministries to hold consultations and pursue alternate sources, the Lok Sabha was informed recently.
Automakers have seen more than 50 import applications for heavy rare earth magnets stuck in Chinese regulatory limbo since April. Some firms are resorting to design changes -- shifting toward motors using lighter rare earths or even magnet-free designs to reduce dependence.
Electronics & advanced manufacturing: India's electronics industry has also felt the pinch as magnet and component shortages delay production timelines.
Industrial and banking sectors: An analysis by the State Bank of India, cited by ET, has warned that curbs could ripple through industries such as transport equipment, machinery, basic metals and electricals/electronics.
The coming disruption may lead to slower production cycles, idle capacity or stranded inventory, pressure on working capital and loss of export competitiveness, the analysts said.
Indian banking, on its part, will likely face heightened financial stress owing to its exposure to the sectors affected.
Looking for a way out
India is actively scouting for rare earth supplies beyond China. Commerce Minister Piyush Goyal has confirmed that Indian companies are engaging with global partners and processing alliances abroad.
India is also pushing more bilateral arrangements. The Mines Ministry has signed deals with nations like Australia, Argentina, Zambia, Peru, Zimbabwe, Mozambique, Malawi, Côte d’Ivoire and international organisations -- like the IEA -- to secure critical mineral supply.
Efforts are also being made to develop magnet-free & alternate motor technologies. According to an ET report, Faridabad firm (Sterling Gtake E-Mobility) is fast-tracking tests on EV motors that do not use rare earth magnets. Several automakers are assessing these designs, with hopes of commercial rollout within a year—accelerated from earlier 2029 targets, news agency Reuters reported in September.
The Indian government is engaging China through commercial and diplomatic channels. Commerce Secretary Sunil Barthwal noted coordination with automakers (SIAM), component associations (ACMA), and dialogue with Chinese counterparts.
New Delhi is pushing for more predictable exports, consistent practices and access assurances.
Only temporary relief?
While China has recently lifted curbs on rare earth magnet exports to India, analysts and industry veterans have warned that this reprieve is tactical. The underlying dependence still leaves India vulnerable to future leverage.
China’s latest tightening reflects a more assertive use of export controls as a strategic tool. The restrictions are broader in scope and more assertive in enforcement than earlier measures.
Essentially, India is caught in a difficult position here. The recent easing of magnet curbs offers some respite, but the pattern of on-off control underscores that the structural risk remains.
To reduce this vulnerability, India must push harder on a number of fronts, analysts say. These include building end-to-end domestic capabilities in rare earth processing and magnet manufacture, strengthening partnerships and supply lines with non-Chinese sources, fast-tracking research into alternate technologies and magnet-free designs, aligning industrial policy (PLI, incentives, regulation), etc.
Source Name : Economic Times