Rare earth, common ground: India and China realign amid US tension
China has eased export restrictions on key items to India. This includes rare earth magnets and fertilizers. The move signals warmer relations between the two nations. It precedes Prime Minister Narendra Modi's visit to China for the SCO summit. Shipments of these items have already commenced. This development follows discussions between the foreign ministers of both countries.
AP Indian Prime Minister Narendra Modi, right, shakes hand with Chinese Foreign Minister Wang Yi, left, in New Delhi, India, Tuesday, Aug.19, 2025. New Delhi: China has lifted restrictions on the export of rare earth magnets, fertilisers and tunnel boring machines to India in a diplomatic breakthrough, signalling a warming of ties between the Asian giants in the face of US tariff threats.
With shipments of the critical inputs getting underway, the initiative to ease tensions to stabilise ties comes ahead of Prime Minister Narendra Modi's trip to China, his first in seven years, for the Shanghai Cooperation Organisation (SCO) summit at the end of the month.
The development took place at the meeting that visiting Chinese foreign minister Wang Yi held with his Indian counterpart S Jaishankar in New Delhi on Monday. The minister assured Jaishankar that China would address India's need for rare earth magnets, fertilisers and tunnel boring machines, a source said. ET has learnt that shipments of these items have already begun.On Tuesday after Wang Yi called on the PM, Modi said he's looking forward to his next meeting with the Chinese President in Tianjin on the margins of the SCO Summit. 'Glad to meet Foreign Minister Wang Yi. Since my meeting with President Xi in Kazan last year, India-China relations have made steady progress guided by respect for each other's interests and sensitivities. I look forward to our next meeting in Tianjin on the sidelines of the SCO Summit. Stable, predictable, constructive ties between India and China will contribute significantly to regional as well as global peace and prosperity,' PM Modi wrote on X.
The Jaishankar-Wang Yi talks covered economic and trade issues, cross-border pilgrimage, people-to-people contacts, river data sharing, trade, connectivity and bilateral exchanges. This was the second time since July that Jaishankar had discussed the issue of trade restrictions with Wang Yi.ET had reported August 14 that India and China may discuss a trade package covering supplies of critical rare earth magnets, fertilisers and pharmaceuticals ahead of the Prime Minister's proposed China trip. The first sign of a thaw in Sino-Indian ties since 2020's border tensions comes as the Trump administration has taken a more accommodating view toward Beijing by extending a trade truce and delaying the imposition of tariffs by another 90 days on August 11, besides moving to lift curbs on the export of high-end chips to China. Trump has been more aggressive against India, threatening to double tariffs to 50%, putting in doubt the visit by a US trade team to negotiate a bilateral trade agreement.India's automobile and electronics industries, including companies such as Bajaj Auto and industry association Electronic Industries Association of India, have repeatedly flagged shortages of rare earth magnets, warning of production getting hit.In April, China mandated special export licences for seven rare earth elements and related magnets. Rare earth minerals are considered vital for high-end technology products, including electric vehicles (EVs), drones and battery storage. China has been a dominant player in the critical minerals supply chain globally. China's fertiliser curbs disrupted di-ammonium phosphate (DAP) supply during the rabi season. Beijing had stopped exports without an official notification, having been a prominent supplier of DAP to India until FY24. Imports from China crashed to 840,000 tonnes in FY25 from 2.29 million tonnes in FY24. Nothing has come to India since January this year. With China's move, Indian DAP stocks are likely to grow, ensuring timely distribution for the cropping cycle. This will relieve pressure on India's procurement channels, sources said.
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