New Delhi, Oct. 31 -- Last November, Vikram Dhoot, managing director of Pune-based Ashvini Magnets, began receiving an unusual flurry of calls and emails from Chinese companies. They wanted to collaborate, transfer technology and supply materials-without any active solicitation.

It wasn't business as usual. Dhoot was used to an occasional inquiry every few months. The sudden attention puzzled him.

Then, in April, China imposed an export ban on rare earth magnets and had already stopped shipping metal-processing equipment. It dawned on Dhoot that the Chinese interest may have had more to do with his company's secret project to make rare earth metals-a first for India.

"When I got those calls, I ignored them," Dhoot recalled. "We were al...