In yet another instance of geopolitical self-determination, China has expanded its export restrictions on a growing list of rare-earth elements (REE). Building on similar controls in April 2025 and the 2023 export licensing regime on graphite, gallium, and germanium, the October 2025 controls go beyond raw materials to cover products containing rare-earth magnets with as little as 0.1% Chinese-origin content or that incorporate Chinese technological expertise. Notably, this is the first time China has applied the foreign direct product rule (FDPR). This will require foreign companies to obtain approval from China's Ministry of Commerce before exporting magnets or certain semiconductor materials that use Chinese REEs, even in trace amounts, or are produced using Chinese mining, processing, or magnet-making technologies. This signifies a technology-denial regime whereby controlling core materials that are preconditions for green innovation, restricting technology transfer and monitoring third-party use, implicates huge consequences for many countries, threatening sovereignty on multiple counts.
China's control over the critical mineral value and supply chain is an effort decades in making, which systematically disenfranchised a similar growth for other countries and is now creating situations rippling across many sectors and impacting future trajectories of growth, innovation, and national security.
Currently, China owns 34% of global reserves, 51% of global mining and 76% of global refining for REEs. Of the 17 REEs on the periodic table, China has imposed control on 12 already. These restricted REEs - Yttrium, Dysprosium, Gadolinium, Samarium and more - particularly impact the defence, electronics and manufacturing sector for India. From December 1, 2025, the new Chinese rules will effectively restrict companies with any links to foreign militaries (non-Chinese), including those supplying or partnering with Indian defence entities from obtaining export licenses. The Chinese Ministry of Commerce has clarified that any requests to use rare earths for military purposes will be automatically denied on principle.
For non-military sectors, China has stated open inclinations to accept licensing requests through multilateral and bilateral dialogues, provided the end-use does not result in defence applications. Similarly, in June 2025 during the previous round of restrictions, China had mandated very invasive end-use disclosures from private companies ranging across end-user identities, customer lists, production line videos, and other technical processes. Global industrial experts had termed this as extreme industrial espionage by threatening supply disruption. While companies - and countries by extension - did comply, routine applications were denied, which resulted in massive losses in manufacturing sectors. In India, while vehicle manufacturing saw a slight downturn, the major impact was on electric vehicles' production. Even when applications were eventually approved, India faced long delays, reflecting the friction of its geopolitical positioning vis-à-vis China.
Chinese Talons Digging Deeper
There is sufficient historical precedent to believe that history will repeat itself and October restrictions will go the same route. India must remain cautious despite recent warming relations with Beijing and go full-throttle on import diversification measures. Perhaps this is exactly the wake-up call India needed to go all the way in securing its critical mineral independence.
Further, Chinese officials have noted that as demand for energy transition deepens, there is justification in expanding control over usage and technology-transfer. After emphasising on the dual-nature of REEs and its criticality in energy transition in Announcement 61, the same day, the Chinese Ministry of Commerce further announced export licensing requirements on lithium batteries as well as artificial graphite anode materials. This move builds a case for Beijing's long-standing strategy of utilising natural resources as a tool of techno-economic statecraft. These tactics ultimately alter the pace and direction of global energy and industrial transitions in a manicured way.
In the past, China had applied export quotas on REEs, tungsten, and molybdenum, which were contested by the United States, European Union and Japan on grounds of conservation of exhaustible natural resources as inconsistent with WTO rules which the latter group of countries won in 2014. While China removed the quotas, since then Beijing has applied other policy tools through duties, licensing, and regulations under the pretext of national security interests which are allowed under WTO's conventions.
Where India Stands
It is essential to note that India's 90% imports of neodymium magnets (type of a REE) are from China. Between 2021-2024, these import volumes quadrupled. The author's research assessing trade data has shown that efforts to diversify beyond China are evident but limited in both volume and price sustainability. While India has REE-bearing monazite sands and entities like IREL engaged in upstream separation, the absence of downstream magnet-making infrastructure remains a serious gap. This signifies that India is outsourcing value addition and manufacturing to foreign players, which are subject to geopolitical volatility. This shows import dependencies on Chinese-origin REEs and related technologies, highlighting an urgent need for domestic production, supply chain diversification, and strategic partnerships to reduce reliance on imports.
India is at a unique juncture where energy transition goes hand in hand with a growing economy. Geopolitical fissures and aforementioned geo-economic tools threaten mineral sovereignty, as argued by the author previously. This can be addressed through value-driven global partnerships and, security-centric stockpiling agreements. While India may remain import dependent in the near future while domestic exploration is ramped up, for a short to medium term, India can look outward based on a certain development-cooperation model of mineral diplomacy. Meaning, India can partner with other resource-rich countries based on criteria, which allows the maximum benefit to be accrued to both nations.
Self-Assertiveness
An Aatmanirbhar Bharat on the path towards a Viksit Bharat must look within to source, service and self-sustain for the longer-term. While the critical mineral space is largely maintained by the PSUs in India; limited private sector engagement must expand, allowing more risk appetite of start-ups to be involved in the exploration process. This practice is needed to hedge ourselves against mercurial geopolitical practices - considering sudden restrictions, India's domestic stockpiles generated through need of the hour explorations can prove sufficient without deterring our larger decarbonisation goals.
Other than this, the recently proposed scheme by Government of India to establish a completely homegrown rare-earth permanent magnet manufacturing ecosystem is a step in the right direction. Current estimates project India's REE demand to grow ~105% by 2030. The proposed facility is projected to support ~6,000 tonnes annually to sufficiently cater current demand. Multiple auctions and early delegation talks with new partner countries highlight India's determined push for mineral independence, refusing to bow to artificially created chokeholds and signal's the nation's resilience and future-oriented outlook of her leadership.
China's reigning position in the rare earth supply chain, nay, the critical minerals chain, is of alarming concern for all, including major western powers like the USA and developing economies like India. To assert its sovereignty on technological expertise, manufacturing ecosystem and clean energy growth, India must treat this moment as a strategic opportunity - to accelerate self-reliance, diversify mineral partnerships, and invest in indigenous innovation across the entire value chain of critical minerals.
(Meheli Roy Choudhury is a Research Consultant at Chintan Research Foundation. Views are personal)
Disclaimer: These are the personal opinions of the author
