Tackling the Rare-Earth Leverage in India-China Dynamics

Chinese Vice Foreign Minister Sun Weidong visited New Delhi on a two-day trip on 12–13 June 2025. The purpose of the visit was to review the status of normalisation efforts in India-China relations. Since Prime Minister (PM) Narendra Modi and Chinese President Xi Jinping’s meeting at the sidelines of the BRICS (Brazil, Russia, India, China, South Africa) summit in Russia in October 2024, there has been a move to normalise relations. However, India’s recent conflict with Pakistan, in response to the 22 April 2025 Pahalgam terror attack, alongside Beijing’s extension of support to Islamabad during this skirmish, cast a shadow on these normalisation efforts. For now, both sides have agreed to rebuild ties with an emphasis on civil society engagements, with the pilgrimage to Kailash Mansarovar in Tibet resuming after a gap of nearly five years. Work is underway to finalise a revised Air Services Agreement that may see the restoration of direct flights between Indian and Chinese cities. According to the Chinese readout, another deliberation of the Special Representatives (SR) will also take place soon. The 23^rd SRs meeting was conducted in December 2024, after nearly five years. The SRs framework was tasked with resolving the boundary question.

India is advancing QUAD based mineral cooperation and PLI  incentives to reduce rare earth dependency

The issue of cooperation on trans-national rivers and the sharing of hydrological data also figured prominently in these talks. Given China’s plans to build the world’s largest hydroelectric dam on the Yarlung Tsangpo river in Tibet—known downstream as the Brahmaputra—this development assumes greater significance. New Delhi had expressed its concerns to Beijing that the interests of lower-riparian states be protected. Additionally, there is no data in the public domain regarding the project’s environmental impact assessment, especially considering the proposed location of the dam lies in an ecologically sensitive zone. Another development related to the issue is the threat by influential Chinese scholars to ‘weaponise water’. Victor Gao, the Vice President of the Centre for China and Globalisation, urged India to respect the Indus Waters Treaty that New Delhi had suspended after the Pahalgam terror attack. Gao’s veiled warning that India must not use the Indus River as a tool of blackmail against the people of Pakistan—since New Delhi would not want to ‘do unto others what it did not want others to do unto it’—has gained significant traction in Pakistani newspapers and media.

There has also been a determination to prioritise negotiations in ‘economic and trade areas’ to resolve specific issues of concern. Weidong’s visit also comes against the backdrop of China’s growing use of rare-earth minerals as a tool of geopolitical leverage. This is a trend that continues to shape global trade and strategic discourse. China dominates the global supply chain for rare earth minerals, producing everything from defence equipment to electric vehicles (EVs) and car seats.

Source:- https://pubs.usgs.gov/periodicals/mcs2024/mcs2024-rare-earths.pdf

Since 4 April 2025, Beijing has imposed strict export controls on seven kinds of rare earth metals and related magnets, including samarium. China’s Ministry of Commerce stated that these materials serve both civilian and defence-related purposes, and that any future exports would be subject to approval through specially issued licences. This move shook the global supply chains, particularly in defence, EVs, and high-tech manufacturing sectors.

Source:- https://pubs.usgs.gov/periodicals/mcs2024/mcs2024-rare-earths.pdf

Currently, China accounts for the global production of samarium, serving as the primary supplier worldwide. Samarium is an essential element for advanced military applications and stands out for its strategic indispensability. It can withstand hot temperatures and is capable of melting lead without losing its magnetic force. It plays a critical role in ensuring thermal resilience within high-speed electric motors, particularly in compact and confined environments, such as the nose cones of missiles, fighter jets like the F-35 and smart weaponry. The disruption in rare earth supply chains is highly vulnerable. This reflects a deliberate strategy by China to create vulnerabilities for countries and companies that rely on Chinese exports. As New Delhi seeks to diversify supply routes and expand domestic capacity, this diplomatic moment may be less about restoration and more about recalibrating the terms of strategic engagement.

Beijing’s timings for controlling the supply chains for rare earths are not accidental. It comes at a moment when the Western and allied military powers have strained their military resources due to the prolonged battles in Ukraine and the Gaza Strip. The cutoff represents a national security danger for countries such as the United States (US), which rely heavily on the samarium for their defence-industrial base. Lockheed Martin—a global aerospace, defence, and security company—is the primary American user of Samarium. It puts 50 pounds of Samarium magnets in each F-35 fighter jet. The Chinese Ministry of Commerce has also tightened rules to ensure that export licenses for such materials are denied based on the final military end-use, even if intermediate buyers appear civilian.

Beijing’s approach is calculated and pragmatic. The export-licence delay has triggered urgent diplomatic outreach from the European Union (EU), South Korean, and Japanese officials. By restricting access to these critical materials, China strengthens its negotiating position in trade talks while signalling a broader strategic message: that control over key technological supply chains can serve as a potent tool of influence—comparable to conventional military posturing.

With KABIL and mining reforms, India is securing overseas assets and opening its rare earth sector to private players

Furthermore, India also finds itself within this matrix of strategic vulnerability. While recent initiatives with QUAD (Australia, India, Japan, and the US) partners have aimed to strengthen access to rare earth elements, India continues to face significant limitations in processing capabilities and mineral reserves. This imbalance carries implications that extend beyond diplomacy, potentially affecting strategic deterrence.

Though India possesses substantial rare earth deposits—especially in states such as Andhra Pradesh and Odisha—its extraction, separation, and refining capacities remain underdeveloped. The processing stage—where China holds a near monopoly—involves complex, capital-intensive, and environmentally hazardous techniques that India has yet to scale effectively.

India has initiated a series of steps to reduce this dependence, including expanding bilateral mining cooperation with Australia and signing critical minerals agreements under the QUAD framework. It has also proposed the inclusion of these minerals under Production-Linked Incentive (PLI) schemes to boost advanced manufacturing. The Indian government has also established KABIL—a joint venture of three state-owned companies—to secure overseas mineral assets. Domestically, regulatory reforms are being introduced to encourage private sector entry into rare earth mining.

Nonetheless, progress has been slow, and the stakes are ever-increasing. As India seeks to indigenise defence production as a part of its broader ‘Atmanirbhar Bharat’ initiative, its continued reliance on  Chinese rare earths presents significant contradictions. Achieving true self-reliance will require mining reforms and a holistic strategy encompassing research and development investment, environmental safeguards, and resilient international partnerships. China’s rare earth strategy has laid bare the extent of India’s unpreparedness.

In an era where power projection extends beyond borders into supply chains and resource dependencies, India must rethink its national security architecture. Rare earth resilience is no longer merely an industrial challenge–it is a geopolitical imperative. China’s strategic use of export controls underscores the urgency for India to translate diplomatic engagements into material preparedness and long-term autonomy.

Kalpit A. Mankikar is a Fellow with the Strategic Studies programme at the Observer Research Foundation.

Khushi Sikka is a Research Intern with the Strategic Studies Programme at the Observer Research Foundation.

• International Affairs
• China
• India
• china and rare earth elements
• china rare earth elements ban
• india china normalisation
• rare earth minerals
• rare earth minerals india
• rare earth supply chain

The views expressed above belong to the author(s). ORF research and analyses now available on Telegram! Click here to access our curated content — blogs, longforms and interviews.

PREV NEXT