China processes over 90 per cent of the world’s rare earth magnets
| Photo Credit:
Steve Marcus
China is unlikely to ease restrictions on export of rare earth minerals and other auto parts till the Indian government reciprocates by dialing down curbs on the Chinese industry under Press Note 3. This stance was made clear to electric vehicle (EV) manufacturers at a meeting in the Chinese embassy during the Diwali period.
According to sources in the EV industry, the Chinese embassy officials were clear about reciprocity from India on allowing FDI from China if they expect easing of export controls on rare earth elements.
“Our industry delegation went to the Chinese Embassy primarily to ask for relaxation of import of magnets. The Chinese trade officials who met us first said ‘you have already solved the issue with replacing magnets and using ferrite motor. So why are you asking for relaxations’,” a manufacturer who attended the meeting told businessline.
In the same breath, the Chinese trade officials made it clear to them that unless some reciprocity is shown towards their domestic industry, which is facing investment troubles in India because of restrictions imposed through Press Note 3, the Indian industry cannot expect relief on the rare earth magnet front.
“He (Chinese embassy official) clearly told not to waste our time going to meet rare earth magnet suppliers in China because that will not help. He said this is an issue that our government has to resolve. He said ‘ask your MEA (Ministry of External Affairs) and DPIIT (Department for Promotion of Industry and Internal Trade) to resolve the issues from their end,” the industry source said.
A query sent to Chinese embassy in New Delhi remained unanswered till the time of press.
China processes over 90 per cent of the world’s rare earth magnets, which are widely used in parts like speedometers, electric motors, e-axles, engine ignition coild etc. Since April 4, this year, the Chinese government has imposed restrictions requiring special export licences for seven rare earth elements and related magnets. The auto industry has been trying various means, including visits to China to meet their suppliers. But so far, the issue remains unresolved.
The Indian importers were also required to give their Chinese suppliers an undertaking that the rare earth magnets procured from them would only be used in vehicles, and not for any defence or military applications. Such applications were also routed through multiple government departments in India, before being forwarded to the Chinese authorities, but even after such cumbersome processes, the restrictions are still prevailing.
The latest meeting with the Chinese authorities have dimmed the industry’s hopes even further.
“Indicating Press Note 3, the Chinese officials mentioned that several products of Chinese companies have not been approved in the last five years by the Bureau of Indian Standards (BIS). In such a situation, we were told it was not realistic for us to expect that a resolution of restrictions on rare earth magnets in just six months,” said another source privy to the meeting.
The industry delegation were told in clear terms that the reference was to Press Note 3 that restricts investments from neighbouring countries, especially China owing to national security.
Government amended the foreign direct investment policy vide Press Note 3(2020) on April 17, 2020 following tensions along the border which led to concerns about the strategic nature of Chinese investments in India. Although Press Note 3 makes no direct mention of China and only makes prior government approval mandatory for investments from countries that share a land border with India, the most affected are Chinse entities.
Published on November 13, 2025
