By Asia Society Australia Non-Resident Senior Policy Fellow, Dr. Muyi Yang

The Australia-China relationship has stabilised after years of geopolitical and trade turbulence. This lays the groundwork for further cooperation, including through joint initiatives in Asia. A significant opportunity lies in Southeast Asia’s push towards an electrified future.

Almost all countries in the region have committed to achieving net zero carbon emissions, and electrifying the end-user sectors, including transport, is a crucial strategy in this effort.

According to the International Renewable Energy Agency’s road map to keep the global temperature rise under 1.5 degrees Celsius by 2050, Southeast Asia is set for a rapid electrification, with more than half of its energy consumption coming from electricity by 2050, up from 22 per cent in 2018. This shift will drive a substantial rise in electric vehicle (EV) sales, reaching about 8.5 million units by 2035, according to EY-Parthenon analysis.

This burgeoning market presents an attractive opportunity for Chinese EV makers, which increasingly seek growth overseas amid domestic competition so fierce it has been described as a bloodbath. Southeast Asia’s close economic ties with China, coupled with Chinese companies’ narrowing prospects in Western markets amid rising import tariffs, is boosting interest in the region.

Chinese brands have shown remarkable growth, from just 38 per cent of the region’s EV market in 2022 to over 70 per cent last year. These efforts are supported by an influx of Chinese investment in EV manufacturing and the upstream supply chain, including mining, mineral processing and battery manufacturing.

Notably, in 2022, leading Chinese battery maker Contemporary Amperex Technology (CATL) announced a nearly US$6 billion joint venture in Indonesia to develop an end-to-end lithium-ion battery supply chain, spanning mining, material processing, battery manufacturing and recycling.

It is not the only Chinese company to do so. CNGR Advanced Material produces nickel and other battery minerals in Indonesia and other leading Chinese battery material producers from Zhejiang Huayou Cobalt to Ningbo Lygend Mining also have their sights set on Indonesia. In Malaysia and Thailand too, companies like NV Gotion, EVE Energy and Senior Technology Material are undertaking significant investments in battery manufacturing.

More Chinese companies are looking around in Southeast Asia for other key materials used in mobility batteries and EVs, such as aluminium and rare earth elements.

This enormous Chinese investment in battery manufacturing and the upstream supply chain offers significant potential for economic growth and job creation in Southeast Asia. It also offers lucrative opportunities for Chinese investors and companies. But to fully realise these benefits, it is crucial to address the environmental and social challenges often associated with mining and processing activities.

Concerns have emerged regarding mining activities in Sulawesi, Indonesia’s nickel hub. These activities have reportedly caused damage to tropical rainforests and disrupted the traditional way of life of the indigenous Bajau people.

Indonesia’s frequent rainfall further complicates these issues. If not properly managed, pollutants from nickel tailings can seep into the groundwater or flow into the ocean, posing environmental and health risks. These issues are not unique to Indonesia but are echoed across the region.

Indeed, they highlight a broader issue: how to manage the rapid expansion of mining and processing activities – to support the region’s transition to an electrified future – while upholding environmental and social responsibilities.

While mining and mineral processing inherently involves environmental and social challenges, there are numerous ways to manage them more responsibly. In this regard, Australia can play a crucial role, with its waste management practices, mine site rehabilitation and indigenous community engagement often being cited as global examples of sustainable mining.

Interestingly, Chinese investments in Australia’s mining sector have encountered fewer socio-environmental concerns, likely due to the expertise brought in by local management in implementing eco-conscious practices, such as wildlife protection initiatives and educational programmes for indigenous communities.

A South-South-North cooperation model presents a promising way forward. By leveraging its proven expertise, Australia can help integrate responsible practices into mining and mineral processing, ensuring that Southeast Asia’s pursuit of an electrified future does not come at the expense of its environmental and social integrity.

This collaboration will also benefit Australian companies and investors. Given Australia’s rich reserves of key minerals such as lithium and bauxite – essential for batteries and EV production – there is a substantial opportunity for mutual gain.

Australia, China and Southeast Asia can harness their collective strengths to build a regional clean tech ecosystem, characterised by diverse and resilient supply chains with interdependent and mutually reinforcing relationships.

While some might question the feasibility of such trilateral cooperation amid geopolitical tensions, history shows that Australia, as a middle power, can actively engage with major powers, mediate conflicts and foster multipolarity.

A successful trilateral cooperation in battery and mineral supply chains among Australia, China and Southeast Asia would show the world that working together is both feasible and beneficial. This South-South-North cooperation could serve as a model, inspiring other countries to join and fostering a growing network of efforts towards a clean, sustainable and prosperous future.

This article originally appeared in South China Morning Post.