China has strategically utilized its control over essential minerals to exert geopolitical influence, particularly in light of evolving U.S. trade policies. The recent export restrictions on materials like gallium and germanium underscore the risks associated with relying heavily on a single supplier for these critical resources.
China plays a pivotal role in the production of key minerals, such as gallium and germanium, which are indispensable for industries like semiconductors, electric batteries, and military technologies. Disruptions in the supply of these materials can have sweeping effects on global industries.
China has frequently employed export restrictions as a response to international trade policies, particularly from the U.S. Following the imposition of restrictions on Chinese tech companies by Washington, Beijing retaliated by limiting exports of materials crucial to military and clean energy sectors.
These export limitations lead to significant supply shortages and price hikes, urging companies to find alternative sources. For instance, the price of gallium surged by over 200% between 2020 and 2024 due to such measures. Nations like the U.S. and Japan are now actively working to establish independent supply chains.
In response to China's mineral export restrictions, the U.S. has shifted towards a strategy known as "friendshoring," which involves relocating its supply chains to allied countries. The U.S. is also investing in domestic production and has filed cases with the WTO against China's trade policies. Despite these efforts, China's influence remains substantial.
India, recognizing the potential vulnerabilities, must enhance its domestic production capabilities of critical minerals. By investing in mining, refining, and advanced manufacturing, India can achieve greater strategic autonomy and reduce its reliance on Chinese imports. Furthermore, forming trade partnerships with resource-rich nations can secure its supply chains.
India has been proactive in exploring lithium reserves both domestically and internationally. Agreements with countries like Australia for critical mineral supplies are in place, along with increased investment in rare earth processing. These efforts aim to mitigate dependence on Chinese imports.
India's ambitions in semiconductor and defense manufacturing are heavily reliant on access to rare earths and critical minerals. Supply disruptions can delay projects and escalate costs, highlighting the need to strengthen local supply chains and diversify import sources to ensure long-term stability.
India stands to gain by positioning itself as an alternative supplier and manufacturing hub. By investing in mineral extraction and refinement, India can attract businesses looking to diversify away from China. However, achieving this requires substantial policy support and infrastructure development.
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