China, explained.
While President Prabowo Subianto has signalled that economic cooperation with China will continue, Indonesia is inviting other countries such as Australia and the United States to invest (@prabowo/X)
Economic dependence, not alliance, suits Beijing’s interests.
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How China views its economic relations with IndonesiaHow China views its economic relations with Indonesia
In 2025, Indonesia and China marked the 75th anniversary of their diplomatic ties, highlighting how the relationship has matured into one of the Indo-Pacific’s most consequential. The commemoration signals not merely symbolism but the growing weight of a partnership that is expanding in trade, investment, and defence. At the same time, both states navigate cooperation alongside the imperative of maintaining autonomy.
For Beijing, Indonesia functions as a strategic partner and hub which an economic centre of gravity securing critical mineral supply chains for electric vehicles and renewable industries. Indonesia relations also serve as a geopolitical buffer on the southern flank of the South China Sea and key energy corridors to the Indian Ocean. Indonesia is seen as a pivotal Global South actor that can bolster China’s nonalignment narrative in platforms such as the United Nations, G20, and BRICS+.
Bilateral trade in 2024 reached US$135 billion, making China Indonesia’s largest trading partner. China is also the country’s second-largest foreign investor, investing in various sectors, including energy, smelters, and transportation infrastructure. During Prabowo Subianto’s state visit to Beijing in November 2024, both governments agreed on new investment commitments worth US$10 billion, covering mineral downstreaming, renewable energy, and digital infrastructure.
This indicates that Indonesia’s exports to China remain heavily reliant on critical minerals and commodities – with minimal technological value added. The reliance on Chinese inputs means that much of Indonesia’s industrial expansion, as stated in the government’s downstreaming policy, largely depends on the stability of Chinese supply chains.
Prabowo retains key policy instruments to recalibrate Indonesia’s position.
Significant Chinese investments in Indonesia’s critical minerals and renewable energy sectors have created path dependency, as much of the technological know-how Indonesia sought to acquire for its economic transformation is 75% controlled by Chinese companies. Since these projects rely on Chinese raw materials or midstream processing, this keeps Jakarta’s critical minerals industrial ecosystem tied to Beijing’s technological and financial orbit. Recent developments – including South Korea’s LG Energy Solution withdrawal and the likelihood of its replacement by a Chinese company – indicate that competitive pressure on Chinese firms remains limited and may even be narrowing. Still, this would not change the underlying dependence of Indonesia’s downstream industries on Chinese technology, capital, and supply chains.
Ironically, what the Indonesian government often touts as quick wins – high-speed rail, industrial parks, battery factories – are merely the local face of a global chain controlled by Beijing. In this framework, Indonesia’s economic sovereignty is not a matter of ownership, but rather the extent to which it can break free from Beijing’s orbit without incurring excessive political and social costs.
In this overall strategy, it is clear that Beijing has chosen a path of “tying up” Indonesia rather than putting it under its sphere of influence. Instead of formal alliances, Beijing relies on these long-term linkages to ensure that Indonesia does not drift too far away from its orbit. As long as strategic minerals and downstream industries in Indonesia remain based on Chinese technology, and as long as Indonesia remains engaged with the Shanghai Cooperation Organisation (SCO) – signified by Indonesia’s first-ever attendance at this year’s SCO leaders’ summit in Tianjin – Beijing does not need to open a new imprint in Southeast Asia.
The China-based Whoosh high-speed railway in Indonesia (Michael Stevanus Hartono/Unsplash)
For Beijing, Indonesia is likely to remain closely tied to China so long as the costs of reducing Jakarta’s economic and technological dependence outweigh the benefits of diversification. However, this trajectory is not predetermined. While President Prabowo Subianto has signalled that economic cooperation with China will continue, Indonesia is inviting other countries such as Australia and the United States to invest in Indonesia’s critical minerals industry, to ensure that the supply chain is not completely dependent on investment from China. However, so far this diversification strategy remains symbolic, since most projects still depend on Chinese technology and financing.
Nonetheless, Prabowo retains key policy instruments to recalibrate Indonesia’s position – tightening technology-transfer requirements, widening capital sources beyond EPC-driven projects, and reinforcing ASEAN-led frameworks that preserve open regional norms.
The Indonesian government may propose that technology transfer should be an integral part of future critical minerals and renewable energy investment from China. It should be subject to regular, independent evaluation and strict enforcement to ensure that Chinese projects generate not only physical infrastructure but also genuine skill diffusion among Indonesian engineers, data scientists, and other professionals. Jakarta can institutionalise this by conditioning investment approvals on clear R&D collaboration benchmarks and vocational training commitments with Chinese firms so that technological gains convert into domestic capability. Rather than deterring investment, such measures would enhance its credibility and long-term sustainability.
Whether Indonesia remains tied up or gradually redefines its trajectory in its economic relations with China will depend on how these instruments are used.
About the authors
Alexander R. Arifianto
Alexander R.
Virdika Rizky Utama
Virdika Rizky Utama, known as Virdi, is a Political Researcher and Executive Director at PARA Syndicate in Jakarta.
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