China's Rare Earth Squeeze: How Export Controls Are Reshaping Global Supply Chains

Following China's strict export controls on dual-use items including gallium, germanium, antimony, and graphite targeting the United States last year, Beijing in April introduced additional export restrictions on seven categories of medium and heavy rare earth elements.

According to foreign media reports, China is establishing a rare earth export licensing system to comprehensively track production chains, further tightening control over rare earth resources. We're seeing that Beijing flexibly wields economic leverage in ways that would make any trade strategist take notes.

Beijing Tightens the Screws on Critical Materials

Nikkei Asia reported that as rare earth stockpiles are on the verge of depletion, India's automotive manufacturing industry faces enormous pressure, with concerns about production lines grinding to a halt. An Indian industry executive stated that supplier inventories typically last only 3 to 6 weeks, and shortages will soon emerge. He pointed out that China's export license requirements involve complex paperwork and lengthy approval processes. Indian importers must first obtain approval from their own country's Directorate General of Foreign Trade, then submit applications through India's Ministry of External Affairs to the Chinese Embassy in New Delhi, with final approval from China's Ministry of Commerce. Currently, more than 20 applications are still awaiting approval.

Another executive revealed that the Indian government is actively responding to the industry's urgent needs, with the Ministry of Commerce, Ministry of Heavy Industries, and Ministry of External Affairs all intervening, while the Prime Minister's Office is closely monitoring the situation. The Indian Embassy in Beijing is arranging for a delegation of Indian automotive and parts manufacturers to meet with China's Ministry of Commerce, though specific dates have not yet been determined.

Indian Tata Motors. AP file photo

India's Auto Sector Feels the Pinch

India is the world's fourth largest automotive producer. However, it is highly dependent on rare earth and component imports from China. The South China Morning Post noted that India's electric vehicle sales exceeded 1.9 million in number last year, accounting for 3.6% of total domestic vehicle sales, but almost all models rely on components imported from China. In 2024 alone, India imported approximately $7 billion worth of electric vehicle batteries and magnets from China. Although India possesses 6.9 million tonnes of rare earth reserves, its extraction and processing capabilities lag far behind China's advanced refining facilities and efficient supply chains.

The Uncomfortable Reality of Chinese Dependence

Mehra, partner and automotive sector head at market research firm Grant Thornton Bharat, stated that China's rare earth export restrictions have caused delays in India's electric vehicle production, rising costs, and slowed technological development. In 2023, China processed over 200,000 tonnes of rare earths, while India processed only 10,000 tonnes, highlighting the technological gap. Analysts warn that without accelerating autonomous transformation, India may fall behind in the clean energy competition.

Regarding rare earth export controls, at a regular press conference held on June 5, Chinese Foreign Ministry spokesperson Lin Jian stated that China's export control measures comply with international common practices, are non-discriminatory, and do not target specific countries.

A New Normal in Global Trade?

In short, China's rare earth controls affect more than just India. As British media noted, China has introduced a tracking system for the rare earth magnet industry, requiring manufacturers to submit transaction volumes and customer information, indicating that export controls may become a long-term policy aimed at strengthening industry supervision and cracking down on illegal activities. This isn't just about short-term leverage—it's about fundamentally reshaping how global supply chains operate in an era where economic security has become inseparable from national security.

Deep Throat

** 博客文章文責自負,不代表本公司立場 **

In his second term, Donald Trump is doubling down on competition with China across most sectors — except one glaring exception: clean energy. Here, he’s effectively ceded ground to Beijing.

The European edition of Politico reveals the Trump administration’s calculated retreat from the clean energy race, pivoting instead to America’s traditional energy strongholds — oil, natural gas, and coal. This pivot has ignited heated battles within the Republican Party, especially over the "Big Beautiful Bill Act," a legislative effort aimed at dismantling Biden’s clean energy subsidies under the Inflation Reduction Act (IRA).

Trump’s team views China as the undisputed leader in global supply chains for batteries, electric vehicles, solar panels, and wind turbines. Their logic? Pouring more US resources into green tech only fuels China’s rise. This zero-sum mindset marks a sharp departure from Trump’s first term, which embraced a more diversified energy approach. Daniel Simmons, an Energy Department official from Trump’s first administration, bluntly states this government "does not care" about clean energy. Within days of his January inauguration, Trump halted IRA funding via executive order and dismissed Biden’s green investments as a "green scam."

Chris Wright, United States Secretary of Energy, a fossil fuel stalwart and former oil magnate who helped unleash the shale gas revolution through fracking, has doubled down on this fossil-first agenda. Recently, he championed an "Energy Freedom Task Force" in Eastern Europe, urging countries like Poland to lean into fossil fuels and nuclear power. He insists fossil fuels are vital for lifting developing countries out of poverty, and dismisses the climate crisis urgency, arguing, “Nothing in the data shows climate change is the world’s most urgent problem.”

Meanwhile, Chinese clean energy titans BYD and CATL continue to outpace the US technologically. Their breakthroughs, such as EV batteries that can charge in five minutes and deliver 400–500 kilometers, underscore America’s growing lag in clean tech. The Trump administration’s rollback of clean energy subsidies threatens to cost American jobs. The IRA’s incentives could generate roughly 160,000 jobs, especially in Republican strongholds like the Sun Belt and Rust Belt. Former Australian diplomat Thom Woodroofe accuses Trump’s team of deliberately stalling clean energy progress, undermining US employment. Research from Johns Hopkins University warns that scrapping subsidies would collapse the planned $50 billion solar and battery export market by 2030, creating an $80 billion investment void that other countries will fill.

Within the GOP, fractures over the "Big Beautiful Bill Act" are widening. Hardliners push for a full repeal of green subsidies, while moderates worry about the economic fallout in local communities. The Rhodium Group think tank cautions that cutting subsidies could stifle next-gen nuclear and geothermal innovation, eroding America’s technological edge.

The takeaway? The global energy transition demands cooperation, not unilateralism. China has repeatedly reaffirmed its commitment to green transformation, urging developed nations to honour their climate pledges. It warns that protectionism and isolationism only harm shared global interests.