Resources, China and the 'de‑risking' dilemma

Australia’s resource sector is still heavily tied to China, even as Western governments talk about “de‑risking” from Beijing. That creates a weird tension: the same miners that power the ASX are also exposed to the main geopolitical story of the decade.[9][2][1]

On the numbers, materials remain the engine room of the index. In 2025 the ASX 200 materials sector gained roughly 24–25 per cent, making it the top performer alongside industrials and utilities. Analysts now expect that strength to continue into 2026, helped by modest global growth, a softer US dollar and ongoing demand for bulk commodities and transition metals. At the same time, Canberra and its allies are trying to reduce strategic dependence on Chinese supply chains, especially for critical minerals and defence‑related materials.[10][11][3][2][1]

For Australian miners, that cuts both ways. On one hand, China is still the largest buyer of iron ore and a major customer for coal, LNG and base metals; a serious slowdown or political flare‑up would hit export volumes and prices quickly. On the other hand, US and European de‑risking has created new opportunities for lithium, rare earths and other inputs as Western governments offer subsidies and long‑term contracts to diversify supply. Domestic policy has also tilted in favour of onshore processing and value‑added projects, though the capital and permitting hurdles are high.[11][12][10][2]

From an investor’s point of view, the key is to be honest about what’s driving earnings. Big diversified miners are still effectively geared bets on Chinese and global industrial activity, whatever the speeches about diversification say. Smaller critical‑minerals names offer more explicit leverage to de‑risking and the energy transition, but also more volatility and project risk.[9][3][2][1]

The “de‑risking dilemma” is that governments want less reliance on China while budgets are still funded by China‑linked royalties and company tax. For the ASX, that means materials can absolutely justify the risk in 2026—but only if investors remember that geopolitical headlines matter just as much as drill results.

Sources
https://www.ig.com/au/news-and-trade-ideas/asx-200-market-outlook-2026-251209[2] https://www.raskmedia.com.au/2025/12/16/which-asx-sectors-performed-best-in-2025/[3] https://www.ig.com/au/news-and-trade-ideas/FY26-outlook-Great-Rotation-from-banks-to-resources-250709[9] https://www.livewiremarkets.com/wires/morgan-stanley-s-2026-outlook-on-the-asx-200-aussie-banks-and-rate-cuts[1] https://www.abc.net.au/news[12] https://www.expertmarketresearch.com.au/reports/australia-semiconductor-market[10] https://www.imarcgroup.com/australia-semiconductor-market[11]