China-Indonesia Closer Economic Ties: Trade and Investment Opportunities

• Since the resumption of diplomatic relations in 1990, China and Indonesia have seen comprehensive development in bilateral economic and trade cooperation. In recent years, this cooperation has accelerated, particularly in trade, investment, and engineering projects.
• Investment has become the most significant highlight of China-Indonesia cooperation. Chinese enterprises have invested in a wide range of sectors in Indonesia, including agriculture, mining, electricity, real estate, manufacturing, industrial parks, the digital economy, and financial insurance.
• China has maintained its position as Indonesia’s largest trading partner for several consecutive years. Currently, Indonesia’s exports to China are primarily resource-based commodities. Additionally, Indonesia has become the largest exporter of bird’s nests to China.

China plays a crucial role in Indonesia’s foreign economic and trade relations, with bilateral investment and trade cooperation growing rapidly in recent years. Indonesia, the birthplace of the “21st Century Maritime Silk Road,” saw President Xi Jinping propose the initiative during his visit in October 2013, elevating China-Indonesia relations to a comprehensive strategic partnership. In November 2022, President Xi and President Joko Widodo reached a significant consensus on building a China-Indonesia community with a shared future.

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At the invitation of President Xi Jinping, President Prabowo Subianto of the Republic of Indonesia made a state visit to China from November 8 to 10, 2024, marking his first official trip since taking office. Following the visit, China and Indonesia issued a joint statement on advancing their comprehensive strategic partnership and building a community with a shared future, committing to creating a new framework for all-around development cooperation. High-level engagement has continued into 2025, which marks the 75th anniversary of China-Indonesia diplomatic ties. In May 2025, Chinese Premier Li Qiang visited Jakarta, where both governments signed four memorandums of understanding on economic cooperation and renewed the Two Countries, Twin Parks (TCTP) industrial collaboration framework.

The Indonesian government prioritizes the development of emerging sectors such as the green economy and digital economy. Leveraging its natural resources, consumer potential, and labor force, Indonesia has significantly increased its investment and support in renewable energy, electric vehicles, high-value-added downstream mining industries, electronic communications, and healthcare.

Given the complementary strengths of China and Indonesia in resources, production capacity, technological innovation, markets, and industrial chains, there is vast potential for further economic and trade cooperation between the two nations. Bilateral trade reached US$167.4 billion in 2025, a 13.4 percent increase from the prior year, underscoring the scale and trajectory of this partnership.

In this article, we explore the strengthening economic ties between China and Indonesia, highlighting potential opportunities in bilateral trade and investment.

China-Indonesia trade profile

As of 2025, China has remained Indonesia’s largest trading partner for 13 consecutive years. According to official statistics, bilateral trade accounted for approximately 31.9 percent of Indonesia’s total trade. China was also Indonesia’s largest source of non-oil imports, contributing around 39.9 percent, and its largest export destination for non-oil and gas products, absorbing US$64.82 billion, or about 22.9 percent of total exports.

Source: General Administration of Customs, China

Indonesia exports to China

Structurally, Indonesia’s exports to China are primarily resource-based commodities. Iron and steel and mineral fuels and together dominate the export basket, valued at US$17.92 billion and US$12.69 billion respectively in 2025. Nickel and articles thereof continue to represent a significant share, reflecting Indonesia’s downstream mineral processing expansion. China’s demand for Indonesian nickel products, coal, and processed minerals remains at high levels.

Source: ITC Trade Map

China’s exports to Indonesia

In contrast, China’s exports to Indonesia are more diversified. Electrical machinery and equipment lead at US$17.14 billion, followed by nuclear reactors, machinery, and mechanical appliances at US$16.87 billion, together reflecting Indonesia’s continued dependence on Chinese capital goods and industrial inputs. Vehicles recorded strong growth of 36 percent annually between 2020 and 2024, reaching US$5.47 billion in 2025, signaling China’s expanding footprint in Indonesia’s automotive market.

Source: ICT Trade Map

China-Indonesia bilateral investment

China’s investment in Indonesia

China is Indonesia’s second-largest source of foreign investment, following Singapore. Indonesia is also China’s second-largest investment destination in ASEAN.

According to China’s Ministry of Commerce (MOFCOM), in 2024, China’s direct investment in Indonesia amounted to US$4.59 billion, with a cumulative stock of US$25.48 billion by the end of 2024.

Source: MOFCOM, China

Why Indonesia?

Currently, an increasing number of Chinese enterprises are seeking investment opportunities in Indonesia, spanning a wide range of sectors and featuring numerous large-scale projects. This trend is primarily driven by Indonesia’s abundant natural resources, vast consumer market, and strategic location:

• Resource-rich economy: Indonesia possesses abundant natural resources, including nickel, copper, and coal, which are attractive to Chinese industries.
• Large and growing market: With a population exceeding 288 million, Indonesia offers a vast consumer market for Chinese goods and services.
• Strategic location: Indonesia’s strategic position in Southeast Asia makes it a crucial trade and logistics hub for China’s Belt and Road Initiative.

Key investment sectors

Chinese investments in Indonesia cover various sectors, including agriculture, mining, electricity, real estate, manufacturing, industrial parks, the digital economy, and financial insurance. These investments are spread across Indonesia’s major islands, achieving significant results in capacity cooperation.

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For instance, Tsingshan Holding Group has established the world’s longest stainless-steel production base in Indonesia, while Weiqiao Group has built Indonesia’s first and Southeast Asia’s largest smelter-grade alumina plant. Xiaomi, OPPO, and VIVO have become leading smartphone brands in Indonesia. Additionally, internet companies like Alibaba, Tencent, and TikTok are not only enhancing the lifestyle of Indonesian consumers but also fostering a new generation of entrepreneurs.

China’s direct investment has significantly bolstered Indonesia’s dominance in the nickel market through major projects like the Morowali Industrial Park. Chinese investments are crucial for Indonesia’s energy transition. Indonesia’s share of global nickel supply reached approximately 60 percent in 2024, up from 31.5 percent in 2020, with Chinese companies controlling roughly three-quarters of domestic refining capacity.

In January 2024, BYD established a US$1.3 billion electric vehicle factory in Indonesia, significantly advancing the country’s electric vehicle industry and solidifying its position in the global market.

In January 2024, BYD established a US$1.3 billion electric vehicle factory in Indonesia, significantly advancing the country’s electric vehicle industry. During President Prabowo’s November 2024 state visit to China, the two countries signed investment agreements worth US$10 billion, covering mineral downstreaming, renewable energy, and digital infrastructure. CATL, the world’s largest EV battery maker, is also constructing a battery factory in Indonesia in partnership with local state firms, further cementing China’s role in Indonesia’s ambition to become Southeast Asia’s EV manufacturing hub.

Infrastructure engineering

Indonesia has long been one of the top ten overseas markets for Chinese companies undertaking engineering contracts. Chinese investment projects continue to drive Indonesia’s engineering market, with Chinese enterprises actively participating in the construction of power plants, highways, bridges, dams, and other infrastructure projects.

Key projects include the Cileunyi–Sumedang–Dawuan Toll Road, the Semarang–Demak Toll Road, and the Suramadu Bridge. Additionally, numerous power plant projects such as the Meulaboh, Pangkalan Susu, Batang, Java 7, South Sumatra 1, and South Sumatra 8 power stations have been undertaken.

Other significant initiatives include the China-Indonesia “Two Countries, Twin Parks” project, the China-Indonesia Economic and Trade Cooperation Zone, the Tsingshan Industrial Park, and the Delong Industrial Park.

A notable milestone is the Jakarta-Bandung High-Speed Railway, which began commercial operations in October 2023. This railway is the first high-speed rail in Indonesia and Southeast Asia, marking the first time China’s high-speed rail system, elements, and entire industrial chain have been implemented overseas.

Indonesia’s investment in China

According to data from China’s MOFCOM, Indonesia’s investment in China reached US$80 million in 2024. By the end of December 2024, Indonesia’s cumulative actual investment in China amounted to US$29.4 billion.

China-Indonesia bilateral agreements

China-ASEAN Free Trade Area

The ASEAN-China Free Trade Area (ACFTA) was first established with the signing of the Framework Agreement on China-ASEAN Comprehensive Economic Cooperation at the sixth China-ASEAN Summit in November 2002. This initial agreement laid the foundation for closer economic and trade relations between China and ASEAN countries and was followed by the signing of the Agreement on Trade in Goods in November 2004, which took effect in July 2005. Subsequently, the Agreement on Trade in Services was signed in January 2007 and became effective in July of that year, and the Agreement on Investment was signed in August 2009.

The ACFTA has significantly impacted China-ASEAN trade, particularly with the full effect of the Protocol on Revising the China-ASEAN Comprehensive Economic Cooperation Framework Agreement in October 2019, which allowed over 90 percent of goods (approximately 7,000 types) to benefit from zero tariffs. This has greatly enhanced trade and investment liberalization and facilitation between the two parties, fostering stronger economic ties and contributing to regional economic development.

Negotiations for the ACFTA 3.0 upgrade, launched at the 25th ASEAN-China Summit in November 2022, concluded substantively in October 2024 after nine rounds of formal talks, with a focus on enhancing cooperation in emerging fields such as the digital economy, green economy, and supply chain connectivity. Negotiations were formally completed in May 2025 at a special online meeting of economic and trade ministers. The ACFTA 3.0 Upgrade Protocol was formally signed on October 28, 2025, at the 47th ASEAN Summit in Kuala Lumpur, witnessed by Chinese Premier Li Qiang and ASEAN leaders. The upgraded agreement expands cooperation into nine new areas, encompassing digital economy, green economy, supply chain connectivity, standards and technical regulations, sanitary and phytosanitary measures, customs procedures and trade facilitation, competition and consumer protection, support for small and medium-sized enterprises, and economic and technical cooperation. Both sides are now advancing their domestic ratification procedures ahead of the agreement’s entry into force.

RCEP

China and the 10 ASEAN countries are members of the Regional Comprehensive Economic Partnership (RCEP), the world’s largest free trade agreement (FTA). Australia, Japan, New Zealand, and the Republic of Korea are also members.

The RCEP aims to simplify and unify trade rules among member countries to reduce trade barriers and create a more seamless trading environment. The agreement covers a broad range of areas, including trade in goods and services, investment, intellectual property, e-commerce, small and medium-sized enterprises (SMEs), economic and technical cooperation, and government procurement.

One of the major commitments of the RCEP is the gradual elimination of about 92 percent of tariffs for traded goods over the 20 years following the agreement taking effect. This is particularly beneficial for export-oriented economies, such as China, Vietnam, and Singapore, as it will enable preferential market access for goods from member countries, increasing their competitiveness in regional markets.

The RCEP came into force for Indonesia on January 2, 2023.

China-Indonesia DTA

China and Indonesia signed the Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income (the DTA) in 2001, which came into effect in 2003.

This agreement facilitates smoother economic cooperation and investment between the two countries by providing clarity on tax obligations.

Key withholding tax rates under the China-Indonesia DTA:

• Dividends: The withholding tax rate on dividends is reduced to 10 percent.
• Interest: The withholding tax rate on interest is also set at 10 percent.
• Royalties: The withholding tax rate on royalties is 10 percent.

These reduced rates under the DTA help promote cross-border investments and economic activities by minimizing the tax burden on income earned from dividends, interest, and royalties.

Look ahead: Opportunities between China and Indonesia

Edible bird’s nests

As health awareness and consumer purchasing power increase, bird’s nests are becoming increasingly popular among Chinese consumers. In this context, China’s bird’s nest industry is thriving, with the market size expanding continuously.  Data shows that in 2025, China’s bird’s nest market size grew to RMB 95 billion, with a compound annual growth rate (CAGR) of 12-14 percent over the past five years.

Indonesia is the world’s largest producer of edible bird’s nests, a key area of bilateral economic cooperation between China and Indonesia. As early as 2017, Indonesia’s exports of bird’s nests to China reached US$60 million, with 80 percent of the bird’s nests sold in the Chinese market originating from Indonesia.

The National Statistics Agency (BPS) of Indonesia reported that Indonesia exported US$387.4 million worth of bird’s nests, weighing around 290 tons, to China in 2022. In the previous year, Indonesian bird’s nest exports to China amounted to US$350.8 million and weighed 228.8 tons.

In July 2023, President Joko Widodo expressed to his Chinese counterpart, Xi Jinping, his desire for China to import more Indonesian edible bird nests during their meeting in Chengdu.

Indonesia’s bird’s nest exports to China reached US$428.79 million in 2024, out of total global bird’s nest exports of US$634.95 million, maintaining China’s position as the primary market. From 2020 to 2024, Indonesian bird’s nest exports to China demonstrated a positive growth trend of 3.75 percent annually.

New energy vehicles and batteries

The new energy vehicle (NEV) and battery sectors are currently the most rapidly developing industries in Indonesia. This is primarily due to the adoption of high-nickel battery technology by various power battery manufacturers. Indonesia, the country with the largest nickel reserves globally, has imposed restrictions on the export of raw minerals and is encouraging companies to establish deep processing facilities within the country. This ban has ushered in a new era of significant growth for Indonesia’s electric vehicle industry. The earliest Chinese companies to invest in Indonesia’s automotive sector were Wuling and Dongfeng Sokon. These companies have established a series of complete production processes and factories. Additionally, Wuling has built a number of standardized factories to quickly establish its supply chain system in Indonesia, providing comprehensive support services. In 2022, Wuling Air, an electric vehicle under SAIC-GM-Wuling, began production in Indonesia. In January 2025, Wuling commenced assembly of battery packs for EVs at its battery production facility in Indonesia, advancing its localization initiative in the market

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Currently, Indonesia has implemented various fiscal and tax policies to support the development of NEVs and continues to open up to foreign investment. Indonesia has a solid automotive industry foundation, with an annual production capacity of 3 million passenger vehicles, accounting for about half of the production in ASEAN countries. In July 2024, Hyundai and LG Energy Solution inaugurated Southeast Asia’s first EV battery cell plant, a US$1.1 billion joint venture in Karawang, West Java, with an output of 10 GWh per year, marking Indonesia’s emergence as a global supplier of power batteries. Chinese investment in battery manufacturing has accelerated further: in June 2025, CATL broke ground on its battery cell factory in Karawang with an initial production capacity of 6.9 GWh, scheduled to commence operations by late 2026, as part of a broader approximately US$6 billion investment spanning the entire battery value chain in Indonesia.

As the NEV market continues to expand, the stability and efficiency of the supply chain are crucial. Chinese and Indonesian companies are collaborating in the supply chain to optimize procurement, production, and sales networks, which helps enhance the competitiveness of the entire industry chain.

Digital economy

Benefiting from Indonesia’s Industry 4.0 policy and the release of domestic consumption capacity, the electronics manufacturing industry in Indonesia is rapidly developing. Currently, Chinese companies such as OPPO, VIVO, Hisense, Haier, and Xiaomi have established operations in Indonesia. Leveraging the successful experience of Chinese e-commerce companies and the high penetration rate of local smartphones, Indonesia’s retail e-commerce sector is growing rapidly. As of early 2024, internet penetration has reached 79.5 percent with over 221 million internet users. Indonesia’s digital economy reached US$90 billion in gross merchandise value in 2024, a 13 percent year-on-year increase, making it the largest digital economy in Southeast Asia. However, due to Indonesia’s unique national conditions, the development path of e-commerce in Indonesia differs from that in China. E-commerce and physical enterprises often exist in a more integrated form, with traditional wholesale and retail enterprises playing a significant role in Indonesia’s e-commerce sector.

Despite the Indonesian government’s concerns about the influx of low-cost Chinese goods through cross-border e-commerce, including its blocking of the Chinese platform Temu from the Indonesian market, there is still broad potential for cooperation between China and Indonesia in the digital economy. During President Prabowo’s November 2024 state visit to China, the two countries signed agreements covering digital technology and new energy vehicles, reflecting continued high-level commitment to cooperation. In addition to e-commerce, China’s advanced technologies can be combined with Indonesia’s local resources and market demand to jointly promote the upgrade and innovation of digital-related industries. The two countries can collaborate on projects in smart manufacturing, smart healthcare, smart cities, and other fields.

Halal products

China and Indonesia each have unique strengths in the halal products market, offering great potential for collaboration.

China has a well-established industrial chain and advanced technology in food processing and manufacturing. This supports large-scale production and quality control of halal products, reducing costs and boosting competitiveness. China’s halal offerings are diverse, including foods, medicines, and cosmetics, catering to various consumer needs. Additionally, China’s strong R&D capabilities enable continuous product innovation to meet market demands.

China is among the world’s leading exporters of halal goods and services, with strong manufacturing capacity concentrated in regions such as Ningxia, Xinjiang, and Gansu, making it both a key supplier and a growing consumer market for halal products, and an increasingly significant destination for Indonesian halal exports.

Indonesia, on the other hand, is rich in natural resources and agricultural products like spices, timber, and coffee. These resources provide excellent conditions for producing unique halal products. Strategically located in Southeast Asia, Indonesia serves as a key trade hub between East and West, facilitating international trade and distribution of halal products. With a large Muslim population, Indonesia presents a significant market for halal products, offering vast opportunities for Chinese enterprises.

China and Indonesia can collaborate deeply in the halal sector to explore both domestic and international markets. By sharing resources, experiences, and technologies, both countries can achieve mutual benefits. For instance, Chinese companies can leverage Indonesia’s natural resources and labor to produce halal products with Indonesian characteristics. Conversely, Indonesian companies can improve the quality and efficiency of their halal products by adopting China’s advanced technologies and management practices.

Notably, Indonesia is implementing mandatory halal certification requirements under its Halal Product Assurance Law, with food and beverage products required to carry halal certification from October 2026, and pharmaceuticals by October 2026 as well. Chinese halal certification bodies are among the more than 90 foreign institutions that have concluded mutual recognition agreements with Indonesia’s Halal Product Assurance Organizing Body (BPJPH), facilitating smoother market access for Chinese halal-certified goods.

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