China's rare earth curbs gone, but the trap remains

China’s recent decision to lift export curbs on critical items like fertilizers, rare earth minerals and magnets, and tunnel boring machines to India has provided a much-needed relief to Indian industry. However, this positive development masks a deeper, more complex geopolitical and economic reality. It underscores the vulnerability of India’s dependence on China for critical materials and technologies — a dependence that China would not hesitate to weaponise when it serves its strategic interests.

This episode must not be viewed in isolation. Rather, it should be treated as a crucial case study in China’s increasingly consistent exports-as-a-weapon strategy. China will use access to critical resources as a bargaining chip, turning the tap on or off depending on the geopolitical climate. And while the resumption of supplies this time comes amid a diplomatic thaw between the two countries, it may well be a calculated move to prevent India from accelerating its journey toward self-reliance.

The strategic significance of rare earths
Rare earth elements (REEs) are indispensable to modern technology. From smartphones and electric vehicles to wind turbines, defense systems, and advanced electronics — these minerals are the backbone of both civilian and military-industrial capabilities. Despite their name, rare earths are not especially rare in nature, but economically viable deposits are limited and often environmentally challenging to extract.

China currently dominates this space, accounting for around 60-70% of global production and an even larger share of the refining and processing capacity. This gives Beijing an outsized influence on global supply chains and it has not hesitated to use it to its advantage.

For India, which imports the bulk of its rare earth needs from China, the implications are profound. Any disruption, temporary or long-term, could paralyze key sectors ranging from clean energy to electronics manufacturing to defense production.

China’s on-off export strategy
The recent temporary halt in exports of rare earths and other critical goods to India was not unprecedented. Over the years, China has repeatedly demonstrated a pattern of using export controls as a geopolitical lever, tightening supply when tensions rise and resuming flow when diplomatic engagement improves.

But there’s an underlying logic to this calibrated strategy. If China cuts off supplies permanently, it incentivises the importing country to seek alternatives whether through local exploration, technological substitution or diversifying suppliers. That would erode China's long-term leverage. Instead, a cyclical "now-you-get-it, now-you-don't" policy creates uncertainty and keeps dependent nations off balance. It ensures that they remain reliant, never feeling secure enough to break free, but always cautious enough not to provoke a complete cutoff.

This is not just about India. Japan, the EU, and even the US have faced similar pressures. China’s strategy thrives on this delicate balance of fear and necessity.

India’s response
If this episode serves as a warning bell, India appears to have heard it. The Indian government has already taken early steps to develop its own rare earth value chain. India's state-owned miner IREL is seeking to collaborate with Japanese and South Korean companies to start commercial production of rare earth magnets, a source familiar with the matter has told Reuters.

The government recently told the Lok Sabha that it has already entered into bilateral agreements with a number of countries such as Australia, Argentina, Zambia, Peru, Zimbabwe, Mozambique, Malawi, Cote D'Ivoire and organisations such as the International Energy Agency. India and Russia too are exploring opportunities in rare earth and critical minerals extraction.

India is accelerating efforts to achieve self-sufficiency in critical minerals, with exploration campaigns underway at more than 1,200 locations across the country, Prime Minister Narendra Modi had said in his Independence Day address.

The recent opening up of the mining sector to private investment under the Mines and Minerals (Development and Regulation) Amendment Act signals an intent to harness India’s own resource potential more aggressively.

Rare earth mining and processing are technologically complex and environmentally sensitive. India lacks the large-scale refining infrastructure and high-end manufacturing capabilities that would allow it to convert raw minerals into strategic components. Developing this ecosystem requires long-term investment, strong R&D, skilled manpower, and international partnerships. This is where India must act decisively. Rather than treating the restoration of Chinese exports as a return to business as usual, it must use this breathing room to build resilience — through domestic capacity building, supply diversification, and strategic stockpiling.

The lifting of Chinese export restrictions may have helped Indian industries avoid immediate disruption, but it should not be mistaken for long-term security. Instead, it must serve as a clear warning, and a catalyst, for India to accelerate its efforts toward critical mineral security, technological self-reliance, and economic resilience.

China will continue to use its dominance in critical sectors to assert geopolitical pressure. The only way to neutralize this weapon is to reduce the dependence that gives it power in the first place. India’s path forward must blend strategic foresight with industrial policy, private sector innovation with public investment, and international collaboration with domestic capability. The time to act is not when the next embargo hits.