The meeting between Modi and Xi Jinping this weekend between India and China is considered significant. India's vehicle manufacturers are facing a severe shortage of heavy rare earth metals as China has halted supplies since April. Over 50 import applications are pending. The meeting is expected to yield a concrete solution for the restoration of supply.
Rare earth metal: Prime Minister Narendra Modi and Chinese President Xi Jinping will meet face-to-face this weekend, where various issues will be discussed. However, the most important topic will be the supply of rare earth metals, which has been halted since April and is severely impacting India's auto sector. More than 50 Indian applications are pending in China, forcing vehicle manufacturers to redesign and seek alternative sources. With recent indications of improved relations, hopes for a resolution from this meeting have increased.
Over 50 of India's Applications Stuck in China
The shortage of rare earth metals has become the biggest challenge for Indian industry. China has stopped their supply since April. More than 50 import applications from India are still pending in Beijing. China controls 90% of the world's rare earth processing, and due to the trade war with the US, it had stopped supplies to many countries. India also fell victim to this strictness.
Although there was a slight increase in total shipments from China to India in July, experts say this was only due to the supply of light-grade rare earth metals. These are mainly used in small motors, while the auto sector requires heavy-grade metals.
China Had Previously Assured
New Delhi officials state that China had recently assured India of resuming the supply of fertilizers, rare earths, and mining machinery. Foreign Minister Wang Yi also visited India for two days at the beginning of this month. However, China's official statement issued then did not mention rare earth supply. This is why expectations from the Modi and Xi Jinping meeting have now further increased.
Some positive steps have also been taken recently between India and China, such as resuming direct flights and talks to de-escalate border tensions. However, normalcy in mineral supply has still not been restored.
Auto Sector Most Affected
India's auto industry has been the most affected by the shortage of rare earth metals. Vehicle manufacturing companies have had to change their designs to reduce reliance on heavy rare earth metals. Many companies are now using light-grade metals or ferrite-based materials.
According to a Bloomberg report, the Indian government is working on a policy to promote domestic rare earth production. However, this will be an expensive and time-consuming step. Bajaj Auto, a major Indian company, has also stated that it is exploring alternative sources and working on developing metals that do not require heavy rare earth metals.
China's Zero Tolerance Policy on Smuggling
The severe shortage of supply has forced vehicle manufacturers to take some unusual measures. According to sources, in some cases, heavy rare earth metals have been brought into India in airline hand baggage. In other instances, they have been hidden within granite slabs.
In July, Chinese state media reported that Beijing had adopted a zero-tolerance policy on rare earth smuggling. It announced strict action against illegal shipments through false claims and third countries. This month, Chinese intelligence officials also accused some foreign agencies of stealing rare earth materials via postal services.
Crucial Meeting for India-China Relations
This meeting between Modi and Xi Jinping will not be limited to minerals; it will also prove to be a major test for the relations between the two countries. This is particularly significant at a time when relations between India and the US have soured over tariffs. This face-to-face meeting is considered even more important after the Galwan clash.
