The New Resource Geopolitics: How G7 Critical Minerals Strategy Is Forcing ASEAN Into a Careful Balancing Act

As the United States and its G7 partners race to build critical minerals supply chains outside China’s control, ASEAN economies — sitting on some of the world’s largest reserves of nickel, tin and rare earth-adjacent minerals — are increasingly practicing a strategy of deliberate hedging: courting Western investment in processing and manufacturing capacity while avoiding formal alignment against China, their largest trading partner and dominant regional investor.

Why This Has Become Urgent

China’s near-total dominance of global rare earth processing — controlling roughly 90% of capacity, according to industry analysis — has turned critical minerals into one of the sharpest instruments of economic statecraft in the current cycle (see our companion coverage). Beijing’s escalating export controls on yttrium, scandium and other elements essential to AI chip manufacturing have made clear to Washington and its allies that dependence on a single-country supply chain for these inputs is a structural vulnerability, not a temporary inconvenience.

Researchers at the Center for Strategic and International Studies have warned explicitly that the pattern of escalating export controls between the US and China risks triggering “an export control and economic statecraft arms race that could severely undermine global security and economic prosperity” (Cryptopolitan).

Where ASEAN Fits

Southeast Asia holds a genuinely pivotal position in this contest, but its individual economies are responding in structurally different ways:

• Indonesia has leaned into resource nationalism, banning raw nickel ore exports to force domestic processing investment — a strategy that has driven record foreign investment but risks entrenching a narrow, commodity-dependent industrial base if it fails to move into higher-value battery manufacturing (see our companion coverage).
• Malaysia has instead captured the manufacturing layer of the battery and electronics supply chain, positioning itself as ASEAN’s leading battery exporter while AMRO credits “robust electronics exports and AI-related investment” for cushioning growth against broader “geoeconomic fracturing” (see our companion coverage).
• Singapore continues to function as the region’s financial and logistics anchor, benefiting from rerouted shipping traffic during the Hormuz conflict while its manufacturing sector rides the same AI-driven semiconductor supercycle reshaping demand for the critical minerals underlying chip production (see our companion coverage).

The Regional Coordination Angle

Rather than each country negotiating individually with Washington or Beijing, ASEAN members have been building horizontal coordination mechanisms. Indonesia and the Philippines have proposed a nickel supply chain corridor explicitly framed around regional integration, with the Philippine Chamber of Commerce and Industry’s president describing the goal as ensuring “ASEAN is strongest when it acts as one unit” (Tribune.net.ph). Separately, Malaysia’s Selangor state has deepened bilateral cooperation with Indonesia’s West Java Province across manufacturing, infrastructure and Islamic finance, reflecting a broader pattern of intra-ASEAN economic deepening running in parallel with — rather than as a substitute for — engagement with both Washington and Beijing (ACN Newswire via Barchart).

Why Neither Superpower Can Simply Bypass ASEAN

For Washington, ASEAN’s mineral reserves and manufacturing capacity represent one of the few credible near-term paths to diversifying critical minerals and electronics supply chains away from China — a strategic priority underscored by the UAE’s own recent upgrade in US technology export access (see our companion coverage), part of a broader pattern of Washington deepening ties with trusted partners outside China’s orbit. For Beijing, ASEAN remains both an enormous export market and, increasingly, a manufacturing base for goods designed to route around US tariffs and export restrictions — making continued economic engagement equally indispensable.

This dual dependency is precisely what gives ASEAN economies room to hedge rather than choose. It also means the region’s trade and investment data over the next several years will likely be read closely by policymakers in Washington, Beijing, Brussels and Tokyo as a real-time indicator of how the broader US-China economic rivalry is actually being resolved on the ground, rather than in policy statements.

Key Takeaways

• China’s dominance of rare earth processing has made critical minerals a central front in US-China economic rivalry, with ASEAN’s mineral reserves newly strategically significant.
• Indonesia, Malaysia and Singapore are pursuing distinct national strategies — resource nationalism, manufacturing capture, and financial/logistics hubbing, respectively — rather than a unified regional approach.
• ASEAN nations are building horizontal coordination mechanisms, like the proposed Indonesia-Philippines nickel corridor, to strengthen collective bargaining power.
• Both the US and China have deep enough economic stakes in ASEAN that the region can credibly hedge between them rather than being forced to align with either bloc.