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. legal and political values. 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.
China Hongqiao: Family Ties to the Party
China Hongqiao’s party ties and provincial connections helped integrate its Indonesian alumina operations into a state-backed system under Belt and Road financing. Both its Shandong and Indonesian operations received state financing support, with the Indonesian operation serving as an upstream supplier to its downstream factories in China.
China Hongqiao is headquartered in Shandong, China’s largest aluminum-producing province, where the company supplies smelter-grade alumina for aluminum production in the province. Shandong’s aluminum output, refined into aerospace-grade plate by Nanshan Aluminum, supplies the Commercial Aircraft Corporation of China’s C919 airframe. While the C919 is a civilian aircraft, China’s commercial and military aerospace sectors share overlapping suppliers, alloy families, and industrial supply chains linked to Aviation Industry Corporation of China, which also produces the J-20 and J-35 stealth fighters and the H-6 bomber family. This overlap makes upstream aluminum control strategically important to China’s broader aerospace and defense industrial base.
The firm’s party ties are embedded at the family level. Founder Zhang Shiping died in 2019. His son Zhang Bo, now Hongqiao chairman, serves as a deputy to the 14th National People’s Congress (2023 to 2028) from the Shandong delegation. Zhang’s daughter, Zhang Hongxia, serves as the corporate party secretary. She was named a national outstanding Chinese Communist Party member in 2021 and served as a delegate to the 20th National Party Congress in 2022. These connections helped China Hongqiao secure incentives to run its factory in Shandong and expand overseas to find bauxite as feedstock.
The Indonesian arm of this network was set up during Xi Jinping’s 2013 state visit to Indonesia, when China Hongqiao signed a joint venture with the Harita Group. The outcome of that partnership, PT Well Harvest Winning Alumina Refinery in West Borneo, financed by the Chinese government under the Belt and Road Initiative, is today the largest smelter-grade alumina plant in Southeast Asia, supplying feedstock to factories in Shandong.
Tsingshan and the Partner Network
Unlike Hongqiao’s family and province-based network, Tsingshan operates through politically connected partners and shareholders that provide political access, industrial intelligence, and downstream offtake. This helps the firm secure upstream nickel assets and integrate Indonesian production into China’s stainless-steel and battery supply chains.
Tsingshan’s largest and most profitable operations are in Indonesia, where it runs the country’s two largest nickel processing complexes: Morowali and Weda Bay. The firm also operates in Zimbabwe and Argentina. At Weda Bay, its partner Huayou Cobalt is chaired by Chen Xuehua, a National People’s Congress delegate who in 2024 tabled the battery-material policy shaping China’s battery strategy. The other partner, Zhenshi Holding, is chaired by Zhang Yuqiang, who concurrently served as party committee secretary and general manager of state-controlled Jushi Group Co., Ltd., China’s largest glass-fiber producer. Zhang resigned from the general manager position but kept the party role.
Tsingshan is also a major supplier to Contemporary Amperex Technology Limited, the world’s largest electric-vehicle battery producer, whose founder Robin Zeng (Zeng Yuqun) is a national-level member of the Chinese Communist Party’s advisory body. Through that position, the firm has direct access to inform the party on what the battery sector needs to succeed, including which subsidies matter most. It is not surprising, then, that Contemporary Amperex Technology has more than 20 embedded party branches operating inside the company.
Having influential partners is common in business. But in China, where the economy is heavily driven by state subsidies and support, those partners deliver early access to the government’s industrial agenda and, at the same time, assurance on offtake and subsidies.
Jiangsu Delong: Takeover by a State-Owned Enterprise
The Jiangsu Delong case shows how Beijing quietly secures strategic assets through both state-owned and state-aligned private firms. Delong’s Indonesian operations were large and profitable, making them strategically valuable. As the company fell into financial distress, three existing Chinese partners moved to absorb Delong’s Indonesian operations: CNGR Advanced Material Co., Ltd., a state-aligned battery-materials producer; Xiamen Xiangyu, a municipally state-owned commodity trader; and China First Heavy Industries.
China First Heavy Industries had held a minority stake in Delong’s Indonesian nickel operations since 2018. When Delong filed for bankruptcy in 2024, the state-owned firm expanded its position, moving from minority co-investor to majority shareholder in PT Virtue Dragon, Delong’s largest nickel processing facility in Indonesia.
China First Heavy Industries’ leadership is embedded in the Chinese Communist Party. Current chairman and corporate party secretary Lü Zhiqiang was appointed in May 2025, and his predecessor Xu Peng was rotated in December 2024 to chair China State Shipbuilding Corporation, the prime contractor for People’s Liberation Army Navy submarines and surface combatants.
China First Heavy Industries is also one of only three Chinese firms capable of producing the largest nuclear-grade forgings, including the reactor pressure vessels used in nuclear-powered submarines. Because these forgings rely on nickel-bearing specialty steels, securing nickel supply chains is strategically important for the firm.
As with Tsingshan and China Hongqiao, the ownership circle is sustained by state-linked financing, subsidies, and networks, keeping Delong’s assets within a closed group of well-connected Chinese entities. In the West, manufacturers that depend on specific materials occasionally take equity stakes in upstream assets and even acquire those companies when they face financial trouble. The Chinese version is different. Information on asset valuations, operational capacities, and reserves circulates only within a closed network of state-aligned firms. What enables this is party embedment and state incentives that push firms, whether Delong or China First Heavy Industries, to keep assets within the circle. Within that circle, asset valuations and deal processes stay internal, leaving outside buyers with little visibility and no clear entry point, including from the Indonesian side where the assets are located. This stands in contrast to when the Indonesian government acquired 51 percent of Freeport-McMoRan’s second-largest copper mine after Chile in 2018, where the state came in as a buyer.
Securing Indonesia’s Minerals
The financial incentives the Chinese Communist Party offers to private industry only work when firms can secure and operate strategic assets. State support is reciprocal, not blind. Here is how Chinese firms secured Indonesia’s minerals at highly competitive prices.
In 2020, Indonesia banned exports of nickel ore, followed by copper and bauxite, as part of a broader push to move processing onshore. Global prices spiked since the country holds roughly 45 percent of the world nickel reserves. Western firms criticized the policy, but Chinese firms did not. Instead, Chinese firms moved upstream into Indonesian processing and gained access to three cost advantages that offset the ban.
First, Jakarta offered 5–15-year tax holidays for investors building downstream capacity. Second, the government’s domestic ore pricing decoupled from world markets, generally pricing ore 25–30 percent below international benchmarks, giving domestic smelters cheaper ore. Third, Indonesia’s coal domestic market obligation requires producers to sell at least 25 percent of output domestically at a government-capped price, also typically 25–30 percent below global benchmarks. All three Chinese firms run coal-fired captive power at their Indonesian smelters. Together, these incentives cut production costs by close to 50 percent.
Geology added a fourth advantage. Indonesian nickel ore averages around 1.8 percent nickel content and bauxite around 45 percent, meaning that 100 kilograms of nickel ore yields at most 1.8–2 kilograms of nickel metal; the rest is waste. Building processing capacity near the mines cut the logistics cost of shipping ore to China and eliminated the need to manage massive volumes of tailings on Chinese soil.
Cheap upstream input from Indonesia matters, but it is only part of the story. What makes the difference is combining that cheap input with Chinese state support and offtake mechanisms. That combination is what separates Chinese firms from other Asian or Western firms. In the minerals sector, low-cost upstream is great, but it is rarely enough on its own to make an asset economic. What keeps assets viable over time is a clear offtake mechanism supported by a predictable price floor.
Coordination Problem
China has pulled ahead of the United States in securing mineral access and production capacity for strategic and defense sectors. Washington understands this, but its response has been fragmented rather than integrated. For example, the Inflation Reduction Act’s Section 45X advanced manufacturing production credit was meant to incentivize domestic critical minerals production, but the draft rule excluded extraction costs, contributing to roughly 680 layoffs at Sibanye Stillwater, the only U.S. domestic palladium mine, before being finalized in October 2024. The CHIPS and Science Act committed $280 billion to rebuild semiconductor manufacturing but funded the chip plants alone, not the mineral inputs they depend on (gallium, germanium, palladium, polysilicon), all imported primarily from China and Russia. This is the mismatch with the Chinese model, where Hongqiao’s upstream control of Indonesian alumina shapes the cost structure of aluminum-using industries, and Tsingshan’s and Delong’s nickel processing shapes the cost of stainless-steel-using industries.
Washington did respond: The March 2025 executive order accelerated critical-mineral permitting and expanded Defense Production Act authority, and the One Big Beautiful Bill Act appropriated additional supply chain funding. Yet these remain discrete interventions without a coordinating architecture, with no single authority responsible for multiple initiatives to address price-floor mechanisms, informational gaps, and cross-initiative coordination.
Considering a Special-Purpose Vehicle
This is not a call for a Chinese-style state-owned enterprise, where state control runs from ownership through to operations. Such a model does not fit the U.S. political system and values. A special-purpose vehicle is a more limited instrument: a legally distinct, government-backed entity created to fund projects, streamline coordination, and manage contracts with private firms, without assuming operational control. Its main purpose would be to reduce the gap on securing minerals crucial for strategic and defense sectors.
The special-purpose vehicle would have three main functions. First, it would absorb selected (not all) cost risks the private sector typically refuses to bear. In the minerals sector, the highest-risk costs are usually longer-duration stockpiling, exploration spending, processing that is uneconomic on its own, and price-floor and offtake commitments that make long-horizon investment viable. The case of Albemarle is illustrative: The U.S. lithium producer announced roughly 400 layoffs in 2024 amid an 80 percent collapse in lithium prices, driven by a surge in low-cost Chinese lithium production, exposure that no current U.S. instrument was structured to absorb. This is precisely what Shandong’s factories did with smelter-grade alumina from Indonesia, and what Contemporary Amperex Technology Limited did with nickel for its battery manufacturing, using state-backed price floors and offtake assurances.
Second, it would serve as an information and strategy-sharing mechanism on key projects, domestic and overseas, covering potential opportunities and the kind of state intervention needed to support private firms. A useful example is the 2016 sale of Freeport-McMoRan’s cobalt asset in the Democratic Republic of the Congo to China Molybdenum. Had this vehicle existed then, it would have had the information needed to intervene in that transaction ahead of time, much as China First Heavy Industries did when it moved on Jiangsu Delong’s asset in Indonesia, or how Chinese firms have the information and the know-how to access Indonesia’s incentive system.
The third function is the crucial one. The vehicle would have the authority to coordinate and manage existing policies and assets. For example, the Department of Defense already holds stakes in firms such as MP Materials and Trilogy Metals through Defense Production Act Title III authorities, but does not support permitting coordination or supply-chain integration to ensure long-term project success, areas in which many private firms struggle. Similarly, the Export-Import Bank’s Project Vault committed $10 billion for domestic critical minerals, but functions primarily as a supply-disruption buffer rather than a mechanism to defend against sustained Chinese price manipulation that can undermine the economics of the projects it funds. The National Defense Stockpile has secured strategic materials since 1939 but does not shape production decisions or absorb commercial risk during price collapses.
Next Step: Defense Production Act
Securing access to critical minerals enjoys bipartisan support in Washington. Creating new legislation could trigger additional bureaucratic layers and prolong discussion. But it needs a new institutional home within an existing framework. The easiest way is to revise the existing Defense Production Act, which already has broad congressional familiarity and nearly 75 years of national security legitimacy behind it. Title III of the act already authorizes loans and direct investment, though its spending thresholds would need to be raised to operate at a competitive scale. The congressional authorization for this new vehicle would also provide an opportunity to add something missing from the existing legislation: authority to formalize interagency coordination and deploy price floors, offtake, and processing subsidies. The Defense Production Act was itself designed with sunset mechanisms and periodic reauthorization, making it a natural fit for a time-bound intervention with built-in oversight.
Conclusion
The three cases share a common architecture. Whether through family-embedded party ties at Hongqiao, politically connected partners at Tsingshan, or state-owned enterprise acquisition at Delong, the Chinese state absorbs commercial risks that private firms cannot bear alone and coordinates action among firms toward a common strategic end. The special-purpose vehicle proposed here is not a structural imitation of the Chinese system. It would use instruments the United States already has to underwrite exploration, processing, and offtake, and add a function that does not yet exist: a coordinating authority that connects actors, streamlines initiatives, and closes informational gaps. Under the Defense Production Act, it would be temporary. Once the gap is closed, its functions would return to private firms, just as the Metals Reserve Company and Defense Plant Corporation did after World War II.
If the United States fails to match Chinese state-industry cooperation in the critical minerals race, the result may not be dramatic — a sudden cutoff or emergency shortage — but it will be no less dangerous. Without strong U.S. government support, American defense contractors or downstream producers may end up paying a premium for feedstock or quietly scaling back production because that feedstock is too expensive or too scarce to justify the expenditure. A country that cannot reliably source the minerals for its aerospace plate or naval steels does not suddenly lose the ability to build those systems. It just becomes slower, more expensive, and more dependent on a competitor that spent decades making sure that would happen.
Ahmad Syarif is a doctoral candidate at Johns Hopkins School of Advanced International Studies. His research examines the political strategies used by U.S. and Chinese firms to secure overseas assets in the natural resources sector. Before joining Johns Hopkins, he spent nearly a decade at the Jakarta office of BowerGroupAsia, advising private firms on political and regulatory environments in Indonesia and Southeast Asia.
Image: Ministry of Public Works of Indonesia via Wikimedia Commons.
