Asian country incorporating an American state (7)
I believe the answer is:
indiana
'american state' is the definition.
(I know that Indiana is a U.S. state)
'asian country incorporating an' is the wordplay.
'asian country' becomes 'India' (country in Asia).
'incorporating' is an insertion indicator.
'india' placed around 'an' is 'INDIANA'.
(Other definitions for indiana that I've seen before include "___ Jones, Harrison Ford hero - US state" , "The Hoosier State" , "US Midwest state" , "Gary's place" , "State between Illinois/Ohio" .)