On Tuesday, August 19, the entire Indian media citing authoritative sources claimed that following a meeting between the visiting Chinese foreign minister Wang Yi and the Indian external affairs minister S Jaishankar the previous day in New Delhi, China has agreed to lift restrictions on export of rare earth minerals and fertilisers to India. “Foreign Minister Wang Yi assured External Affairs Minister Jaishankar that China is addressing India’s needs of fertilisers, rare earths and tunnel boring machines,” PTI quoted one of the sources as saying. A section of the Indian media even carried headlines such as “China to resume fertiliser, rare earths exports to India.”
On the other hand, on the same day, a section of the official Chinese media carried reports either denying or expressing ignorance regarding what was being claimed in the Indian media about “China lifting curbs on rare earths exports to India.” Within a couple of hours of the Indian media reports, China’s semi-official Global Times published a report in its “economy” section denying reports of China lifting rare-earth exports to India. On being asked if the Indian media reports were true, the Chinese foreign ministry spokesperson Mao Ning replied: “What I can tell you is that China is willing to strengthen dialogue and cooperation with relevant countries and regions to jointly maintain the stability of the global supply chain.”
It’s more than a month since Wang Yi visited India and reportedly made the assurances, but China is yet to resume the export of rare earth minerals to India. A section of India’s financial press is already raising questions such as “Did China actually lift export curbs on rare earths exports to India?” “China yet to resume rare earth exports to India despite Wang Yi’s assurance,” “Three weeks after Wang Yi told Jaishankar curbs would ease Indian importers still await shipments to arrive” etc. and so on.
Why Chinese rare-earth minerals and magnets matter to India
China, possessing around 70 per cent of global rare earth mining, is a key distributor in the global supply chain of these critical minerals. Since these minerals are essential in the manufacturing of electrical vehicles, battery storage and drones, they are important in ensuring India’s economic growth. Rare earth elements and magnets are crucial for electric vehicles, consumer electronics and smartphones, a report in a financial daily on the delay in the Chinese shipments claimed.
“None of our importers of rare earth magnets, including EV manufacturers, has received their supplies from China. Nor have we heard of any confirmations from Beijing on our applications getting expedited,” a source tracking the matter told the financial daily.
As mentioned, in the absence of a confirmation in Beijing on the lifting of export curbs to India, the Indian manufacturers are clueless about when, if at all, Beijing is likely to fulfil its commitments on restarting exports. “Since the Chinese Minister gave a direct assurance on the matter to the Indian Minister, it was being hoped that action would happen early despite no official statement on the matter,” an Indian importer complained.
Why is Beijing weaponizing its monopoly of rare earths
A report by the Shanghai Metal Markets (SMM) – a leading metals information provider, explains why rare earths are strategically critical, saying “rare earth elements comprise a group of 17 minerals with unique electronic and magnetic properties that make them irreplaceable in many high-technology applications. Despite their name, most rare earths aren’t particularly scarce in the Earth’s crust—but economically viable concentrations are uncommon, and processing them presents significant technical challenges.” The strategic importance of these elements – also called “industrial vitamins” – stems from their essential role in both civilian and military technologies, including the EVs, wind turbines, MRI machines, consumer electronics, precision-guided missiles, radar systems, jet engines, etc.
With the rapid transition toward renewable energy mining innovation, experts say demand for rare earths is projected to increase dramatically. The SMM reckons China’s dominance in the rare earth industry extends far beyond its natural resource advantages. Through decades of strategic investment and policy support, China has established control over nearly every stage of the rare earth supply chain.
China first used export controls on rare earths and rare earth magnets to the US as “weapon” to retaliate against Washington imposing a 145% tariff on Chinese imports on April 2. As a result, the US was compelled to agree to a 90-day truce on tariff war with China in May. Subsequently, a couple of months later, not only the US agreed to extend truce with China for a second 90-day period on August 12 but also reduced tariffs on China to 30% (China has levied a 10% tariff on US goods).
Additionally, what was remarkable with the second truce extension was that it was linked to an extraordinary decision by the Trump administration to grant licenses for the export of Nvidia and Advanced Micro Devices (AMD) of high-end computer chips used in the development of artificial intelligence to China. Notably, the decision to ban export of Nvidia H20 chip and AMD chips to China was announced way back in April along with the slapping of a 145% tariff.
Why China is refusing to lift restrictions on rare-earth export to India
Interestingly, the announcing of April 2 measures and subsequent tariff hikes on China was a well-calculated move and a key element of Trump’s agenda for a new global order (a.k.a. new Cold War with China). It is not incorrect to say it was Trump’s “frontal assault” on China. However, in spite of the two periods of 3-month “truce” extension, the threat of China’s rare-earth export restrictions continues to hang over the US. Flows of rare earth magnets from China to the US rose to 619 tons in July, up from only 46 tons in May after the announcement of the first truce. But the shipments are still well below the level they were before Beijing’s imposition of export controls.
The recent reports, as cited above, point out China’s export controls targeted seven of the 17 rare-earth elements, but also covered magnets that can contain just a tiny amount of those restricted materials. It is this reason why in April this year China announced a quota system to its rare earth minerals and rare earth magnets export restriction regime. China’s dominance in the rare earth industry extends far beyond its natural resource advantages. Through decades of strategic investment and policy support, China has established control over nearly every stage of the rare earth supply chain.
At one level, notwithstanding the reported assurances by Wang Yi to Jaishankar in New Delhi a month ago, China’s growing “increasingly sensitive about rare earths and its control over supply” is what explains it is not that India is singled out and is being targeted by Beijing for continuing curbs on rare-earth export. The industry analysts believe that “supplies to all nations are snarling up” while China’s bureaucracy and buyers worldwide adjust to the new regime.
At another level, China, citing available global resources, is fully aware that India also boasts among the world’s largest rare earth reserves, reaching 6.9 million tonnes. Besides, analysts in China know following the United States, the Indian government is also considering rare earth mining in Myanmar. Last week, the Chinese media reported that India’s Ministry of Mines has ordered state-owned and private companies to explore the mining and transportation of rare earth minerals in north-eastern Myanmar.
In conclusion, data shows that global rare earth resources are not scarce. It is indeed true that China is not only both the largest producer and importer of rare earths but is also the world’s largest processor of these elements into magnets. In 2024, China’s total rare earth imports stood at 77,300 tonnes, of which 44,000 tonnes or 57% came from Myanmar. The industry experts believe China alone has over 90% of the world’s rare earth processing capacity. Taking cue from the US’ rare-earth dependency on China – this despite the fact that California in the US is one of the largest and richest rare earth reserves in the world but lags in rare earth processing – experts in China are of the view that the Indian media resorted to the “mischief” of attributing to the visiting Chinese foreign minister last month of “promising to resume rare earth exports to India.”
Perhaps, what Professor Lin Minwang, deputy director and researcher at the Institute of International Studies at Shanghai’s prestigious Fudan University, pointed out best sums up the mood in China on why no promised shipment is arriving at the Indian ports. “If India seeks to improve relations with China, China welcomes it. However, China will not make major concessions even if that displeases the Indian government,” the professor quipped.
