Control Without Ownership: How China’s Party-Business Networks Dominate Indonesia’s Mineral Supply

In 2024, when Jiangsu Delong, the world’s second-largest stainless-steel producer, filed for bankruptcy, several Chinese firms and state-owned enterprises quietly absorbed its Indonesian assets. Among them was China First Heavy Industries , a state-owned enterprise founded in 1954 as one of China’s early Soviet-backed industrial projects. Today, China First Heavy Industries supplies military-grade metals to China’s military, including reactor vessels for nuclear submarines.

For a manufacturer embedded deeply in China’s naval industrial base, securing nickel feedstock for specialty steels is crucial. The episode reveals China’s strategy for critical minerals: Incentivizing access to upstream assets for Chinese firms reduces the risk of supply disruptions and shapes the cost structure of downstream products in military equipment, semiconductors, and other strategic industries. China achieves this through active party-business coordination, which reduces commercial risk through two mechanisms. First, company officials sit inside the party wing of the firm, and party officials sit inside the firm’s leadership. Second, state-owned enterprises operating directly under party authority work alongside or behind private firms. Both arrangements create a two-way exchange: Firms share ground-level information on mineral assets, while the state delivers low-interest credit and offtake assurances that buffer firms against price volatility. Indonesia is a useful case for understanding how the Chinese strategy works to secure cheap mineral feedstock. Three major firms illustrate this: China Hongqiao , the world’s largest primary aluminum producer; Tsingshan Holding Group , one of the world’s largest stainless-steel producers; and Jiangsu Delong Nickel Industry , the second largest. Chinese-style party-business coordination has put China ahead of the United States in securing upstream minerals. But closing the gap does not require copying the Chinese model, which would not align with U.S. It requires reactivating an American precedent : a special-purpose vehicle modeled on the World War II-era Metals Reserve Company and Defense Plant Corporation , with contemporary parallels in the Japan Organization for Metals and Energy Security and the European Critical Raw Materials Act . The final section shows how this vehicle could be built using existing authorities via the Defense Production Act.

Key points

• For a manufacturer embedded deeply in China’s naval industrial base, securing nickel feedstock for specialty steels is crucial.
• The episode reveals China’s strategy for critical minerals: Incentivizing access to upstream assets for Chinese firms reduces the risk of supply disruptions and shapes the cost structure of…
• China achieves this through active party-business coordination, which reduces commercial risk through two mechanisms.
• First, company officials sit inside the party wing of the firm, and party officials sit inside the firm’s leadership.
• Second, state-owned enterprises operating directly under party authority work alongside or behind private firms.