In a move with far-reaching global consequences, China has once again tightened its grip on the rare earth metals market, expanding export restrictions on critical materials and technologies that power modern industries—from electric vehicles and wind turbines to defense and semiconductors.
The new rules, announced on October 9, require Chinese exporters to obtain official licenses to ship technologies, machinery, or equipment related to rare earth mining, smelting, separation, magnet manufacturing, and recycling. Even maintenance and upgrades of production lines now fall under the new licensing regime.
China also imposed strict curbs on overseas cooperation, mandating approval for joint projects between Chinese firms and foreign entities. Beijing justified the move on national security grounds, saying the rules are meant to prevent diversion of sensitive materials into military use.
Impact on India: Growing Dependence, Shrinking Options
India, already heavily dependent on China for rare earth magnets and components, finds itself in a precarious position. Beijing has demanded end-user certificates assuring that Indian imports won’t be diverted for U.S. or defense applications, a clause New Delhi has not fully accepted.
Indian automakers, electronics producers, and renewable energy firms are now feeling the squeeze. More than 50 import applications for heavy rare earth magnets remain stuck in Chinese clearance, leading to delays and production bottlenecks.
The automobile industry, especially electric vehicle (EV) makers, is among the worst hit. Some manufacturers are reportedly shifting to lighter rare earths or developing magnet-free motor designs to reduce exposure. The electronics and advanced manufacturing sectors have also been forced to slow down production due to input shortages.
A report by the State Bank of India (SBI) warned that extended supply disruptions could hurt transport equipment, machinery, and basic metal industries, leading to idle capacity, liquidity stress, and reduced export competitiveness.
Global Leverage and Strategic Moves
China’s dominance in rare earth refining and magnet manufacturing—estimated at over 90% of global capacity—gives it immense geoeconomic leverage. By selectively approving or blocking exports, Beijing can influence industrial and diplomatic decisions across major economies.
While India and China have engaged in limited commercial dialogue, analysts view Beijing’s recent easing of export curbs on select magnets as temporary and tactical. The pattern of “on-off” supply underscores India’s strategic vulnerability.
India’s Countermeasures: Securing Alternatives
In response, India is accelerating efforts to diversify supply chains and reduce reliance on China. The Commerce Ministry has been exploring partnerships with countries such as Australia, Argentina, Zambia, Zimbabwe, and Peru, as well as collaborating with the International Energy Agency (IEA) for critical mineral access.
Domestic firms like Sterling Gtake E-Mobility (Faridabad) are testing magnet-free electric motors, potentially reducing dependency on Chinese rare earths. The government is also promoting R&D in alternative motor and magnet technologies through its PLI schemes and industrial incentives.
Commerce Secretary Sunil Barthwal confirmed that New Delhi is coordinating with automakers, industry bodies (SIAM, ACMA), and foreign partners to stabilize the situation.
The Bigger Picture
Experts warn that while India’s recent diplomatic success in securing partial export approvals is welcome, the structural risk remains. China’s control over refining and magnet manufacturing continues to be a strategic choke point in global supply chains.
India’s long-term resilience will depend on developing end-to-end rare earth processing capabilities, strengthening global partnerships, and investing in innovation for magnet-free technologies. Until then, the world—and India—remains at the mercy of China’s strategic resource play.
