In a notable shift in geopolitical dynamics, India and China are showing signs of a strategic realignment, particularly in the realm of rare earth elements, amid rising tensions with the United States. This development could reshape the critical minerals landscape in Asia and address India's growing demand for these strategic resources.

Easing Export Restrictions and Renewed Dialogue

China has recently eased export restrictions on key items, including rare earth magnets and fertilizers, to India. This move signals warmer relations between the two nations, especially preceding Indian Prime Minister Narendra Modi's visit to China for the Shanghai Cooperation Organisation (SCO) summit. Shipments of these items have already commenced. The decision follows discussions between Indian External Affairs Minister S. Jaishankar and Chinese Foreign Minister Wang Yi, with Wang assuring that Beijing had already acted on New Delhi's requests.

Wang Yi's visit to India for border talks with Indian National Security Advisor Ajit Doval, along with his meeting with Prime Minister Modi, underscores the high-level nature of these discussions. This is the second such meeting since a deadly clash between Indian and Chinese troops in June 2020. Modi is scheduled to meet Chinese President Xi Jinping at the SCO summit, marking his first visit in seven years.

Economic and Strategic Implications

Increased cooperation between China and India in rare earth elements could significantly boost India's manufacturing sector, especially in high-tech industries that rely on these critical materials. This collaboration could support India's resource strategy and ambitious renewable energy and electric vehicle initiatives, which require substantial quantities of rare earth magnets for wind turbines and electric motors.

China's commitment to addressing India's rare earth needs comes as India has identified 30 minerals critical for its economic security. These elements are essential for various applications in electronics, manufacturing, medical science, renewable energy, and technology. While India possesses the world's fifth-largest rare earth reserves, it lacks magnet production capabilities and relies on imports, mainly from China.

Potential Impact on Global Markets

The potential China-India rare earth cooperation could have several implications for global markets: * Supply chain stabilization for Indian manufacturers, potentially reducing market uncertainty. * Pricing impacts if significant volumes flow to India, affecting availability for other markets. * Investment signals for new rare earth projects globally, as market participants assess changing trade patterns. * Trade relationship shifts as countries reconsider their strategic positioning in critical mineral supply chains.

US Tensions and Shifting Alliances

This realignment occurs against the backdrop of rising tensions between both India and China with the United States. Some analysts suggest that US President Donald Trump's tariff policies and trade wars have inadvertently pushed India and China closer together. The US is the number one trading partner of India, and the top market for Indian exports. However, India has criticized Washington's sanctions as unfair, especially since the US and the European Union continue trade dealings with Russia. This has opened the door for China and India to strengthen their economic and strategic partnership.

Cautions and Historical Context

It is important to note that China has previously committed to speeding up export licenses for Europe and the US "without actually dismantling the control regime," working through "a huge backlog of applications" rather than fundamentally changing its export policies. Recent export data reveals a concerning 58% decline in rare earth magnet exports to India since January 2025, highlighting the practical impact of China's export control regime on bilateral trade.

Despite the improved dialogue and easing of restrictions, longstanding issues such as border tensions and other strategic disagreements remain. However, the mutual benefits of economic cooperation, amid global uncertainties, are creating strong incentives for engagement.