Australia could order the major shareholder in rare earths company Northern Minerals to sell its stake in an escalation of a row over Chinese attempts to maintain a monopoly on the supply of materials essential in defence and other critical industries.

A divestment order is one of the options on the table for Treasurer Jim Chalmers if a Foreign Investment Review Board probe finds Chinese businessman Wu Tao and his Singapore-registered Yuxiao Fund have tried surreptitiously to boost a stake in rare earths play Northern Minerals.