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China's willingness to consider addressing India's rare-earth requirements represents a potentially significant shift in their relationship, particularly in the aftermath of the Galwan crisis of 2019. The fatal clashes between Indian and Chinese soldiers marked a low point in bilateral relations, the worst in decades. This new development suggests a possible attempt to mend fences and explore areas of mutual economic interest. The promise made by China's Foreign Minister Wang Yi to External Affairs Minister S Jaishankar during meetings in New Delhi includes addressing India's needs in fertilizers, rare earths, and tunnel-boring machines. This commitment comes ahead of Prime Minister Modi's planned visit to Tianjin for the Shanghai Cooperation Organisation (SCO) summit, his first trip to China in seven years, indicating a desire to engage at the highest levels. The emphasis on rare earths is particularly noteworthy, especially in light of the evolving geopolitical landscape. Rare earth minerals are crucial components in numerous high-tech industries, and securing their supply is of strategic importance. The article highlights the complexity of the global situation by mentioning the United States' own engagement with China regarding rare earths. Despite considering Beijing a strategic rival, the US seems to have entered into an agreement to ensure its industrial needs are met. Former US President Donald Trump's announcement on Truth Social, stating that a deal with China was nearing completion and would include the supply of rare earths, further underscores the importance of these materials in international trade and relations. The imposition of tariffs by the United States on India, including a 25% tariff on New Delhi's continued import of Russian oil, adds another layer of complexity. India's reliance on Russian oil is driven by its burgeoning energy requirements, and the US tariffs have been met with criticism from Delhi, who views them as unfair and unjustified. In contrast, China, which imports even more Russian oil than India, has not faced similar sanctions. The divergent treatment of India and China by the US raises questions about the consistency and fairness of US trade policy. It remains uncertain whether China's decision to consider India's rare-earth needs signals a broader strategic realignment between New Delhi and Beijing. However, the article emphasizes that the current global order is in a state of flux, partly due to the policies and actions of the Trump administration. Beijing's desire to conduct business with both New Delhi and Washington is evident. The Chinese government's statement, referring to "unilateral bullying," is a clear jab at Washington, suggesting a perception of unfair trade practices and geopolitical pressure. China's call for China and India to demonstrate global responsibility and promote a multipolar world highlights its ambition to play a larger role in shaping the international order and its desire to unite developing countries against what it perceives as Western dominance. The article also provides valuable context about China's dominance in the global rare-earth market, controlling 60-70% of global rare earth mining. This dominance gives China significant leverage in international trade and geopolitics, making its decisions regarding rare-earth supply all the more significant. The unique physical and chemical properties of rare earth minerals make them essential for reducing energy consumption, miniaturization, and thermal stability, further emphasizing their importance in modern industries. India has identified 30 minerals that are critical for its economic security, highlighting the strategic importance of securing a reliable supply of these materials. A report by the State Bank of India reveals that India has been spending approximately $33 million per year for the past four years to import rare earths and compounds, indicating a significant dependence on foreign sources. These materials have a wide range of applications in electronics, manufacturing, medical science, renewable energy, and technology, all of which are crucial for the Indian economy. While China has not imposed a complete ban on rare earth exports to India, the existence of strict export restrictions and a complex licensing system, requiring special permits, has disrupted supply chains for Indian manufacturers. The SBI report identifies several sectors in India that have been negatively impacted by these restrictions, including transport equipment, basic metals, machinery, construction, and electrical & electronics. This disruption underscores the vulnerability of Indian industries to changes in China's trade policies and the need for India to diversify its sources of rare earths and develop its own domestic production capacity. The article presents a nuanced picture of the complex relationship between China, India, and the United States, highlighting the strategic importance of rare earths in the global economy and the evolving geopolitical landscape. The potential for a closer economic relationship between China and India, driven by mutual economic interests and a shared desire to counter perceived Western dominance, could have significant implications for the global order. The article also underscores the importance of India's strategic autonomy and its need to diversify its supply chains and develop its own domestic capabilities in critical minerals to ensure its economic security.
Expanding upon the intricacies of the US-China-India dynamic concerning rare earth elements (REEs) reveals a landscape fraught with strategic maneuvering and economic interdependence. The United States, long wary of China's dominance in the REE market, has taken steps to mitigate its reliance on Chinese sources. The agreement alluded to in the article, while not fully detailed, suggests a pragmatic approach by the US, prioritizing its industrial needs even while maintaining a stance of strategic competition with China. This highlights the inherent tension between economic cooperation and geopolitical rivalry. The imposition of tariffs on India by the US, while seemingly contradictory to the US's broader strategy of containing China's influence, likely reflects a combination of factors, including pressure on India to reduce its reliance on Russian oil and a broader agenda of trade protectionism. However, the disparity in treatment between India and China regarding Russian oil imports raises questions about the fairness and consistency of US policy. India, caught in the middle of this geopolitical tug-of-war, faces the challenge of balancing its relationships with both the US and China while pursuing its own economic and strategic interests. The potential for China to address India's REE needs could be a significant boost to India's economy, particularly in sectors dependent on these critical minerals. However, it also raises concerns about India's potential over-reliance on China, mirroring the situation the US has been trying to avoid. To mitigate this risk, India needs to actively pursue diversification of its REE supply chains, exploring alternative sources and investing in its own domestic production capabilities. This includes strengthening ties with other countries that possess REE reserves, such as Australia, and promoting research and development in REE extraction and processing technologies. The role of the Shanghai Cooperation Organisation (SCO) in this context is also noteworthy. The SCO, of which both China and India are members, provides a platform for dialogue and cooperation on a range of issues, including economic development and security. Prime Minister Modi's upcoming visit to Tianjin for the SCO summit presents an opportunity to further explore the potential for economic cooperation between China and India, including in the REE sector. However, it is important for India to approach these discussions with caution, ensuring that any agreements reached are in line with its own strategic interests and do not compromise its independence. The broader implications of China's willingness to consider India's REE needs extend beyond the immediate economic benefits. It could signal a shift in China's approach towards India, potentially leading to a more stable and cooperative relationship. However, it is important to note that this is just one aspect of a complex and multifaceted relationship. Other issues, such as border disputes and geopolitical competition in the Indo-Pacific region, continue to pose challenges. Ultimately, the success of any attempt to improve relations between China and India will depend on both sides' willingness to address these challenges in a constructive and mutually beneficial manner.
Delving deeper into the strategic implications, we must consider the broader context of global resource competition and the evolving geopolitical landscape. The dominance of China in the rare earth market has become a significant concern for many countries, leading to efforts to diversify supply chains and develop alternative sources. This is not just an economic issue but also a matter of national security, as rare earths are essential for the production of advanced technologies used in defense, aerospace, and renewable energy. The US, for example, has been actively seeking to revive its domestic rare earth industry and reduce its dependence on China. This includes providing financial incentives for mining and processing companies, investing in research and development, and working with allies to secure alternative sources of supply. Similarly, other countries, such as Japan and Australia, have been taking steps to diversify their rare earth supply chains and reduce their reliance on China. India's efforts to secure a reliable supply of rare earths are part of this broader global trend. The country's dependence on imports, particularly from China, makes it vulnerable to supply disruptions and price fluctuations. Therefore, it is crucial for India to develop a comprehensive strategy for rare earth security, including diversifying its sources of supply, investing in domestic production, and promoting research and development. The potential for cooperation between China and India in the rare earth sector could be a win-win situation for both countries. China, with its vast reserves and established processing infrastructure, could benefit from access to India's growing market and its skilled workforce. India, on the other hand, could benefit from a more stable and reliable supply of rare earths, which would support its economic growth and technological development. However, any such cooperation must be based on mutual trust and transparency, and it must not compromise India's strategic autonomy. India must also ensure that it has adequate safeguards in place to prevent China from using its control over rare earth supplies as a tool for political leverage. The geopolitical implications of China's rare earth dominance extend beyond its relationship with India. China's control over these critical minerals gives it significant leverage in its relations with other countries, including the US and Europe. This has led to concerns about China's potential to use rare earth exports as a weapon in trade disputes or geopolitical conflicts. For example, in 2010, China restricted rare earth exports to Japan during a territorial dispute, highlighting the potential for these minerals to be used as a tool for coercion. Therefore, it is essential for countries to work together to diversify rare earth supply chains and reduce their dependence on China. This includes promoting international cooperation on research and development, establishing strategic stockpiles of rare earths, and developing alternative sources of supply. The potential for India to play a more significant role in the global rare earth market should not be overlooked. India possesses significant reserves of rare earths, although they are not as large as those of China. By investing in domestic production and promoting research and development, India could become a major player in the global rare earth market, reducing its dependence on imports and contributing to global supply chain diversification. This would not only benefit India's economy but also enhance its strategic autonomy and its position in the global geopolitical landscape.
Source: China's 'Promise' To Address India's Rare-Earth Needs: Just Business Or Strategic Realignment?