Unlocking China’s Investment Potential in Indonesia

China’s investment in Indonesia has been growing rapidly, making it one of Southeast Asia’s key drivers of economic development. With trade agreements, government partnerships, and strategic infrastructure projects, Chinese businesses and investors are capitalizing on Indonesia’s abundant resources, strategic location, and growing consumer market. 

This article explores where China is investing in Indonesia, the sectors benefiting the most, and how investors can maximize profits in this expanding economic relationship. 

Overview of China’s Investment in Indonesia 

China has been Indonesia’s biggest trading partner for 10 consecutive years. In 2022, trade between the two nations accounted for 25.24% of Indonesia’s total trade. China is also: 

• Indonesia’s top import source for 13 years (28.52% of total imports in 2022). 
• Indonesia’s seven-year top export destination (22.58% of total exports in 2022). 

In 2022, China-Indonesia trade reached US$149.09 billion, a 19.8% increase from the previous year. 

• China’s exports to Indonesia: US$71.32 billion (+17.8%). 
• Indonesia’s exports to China: US$77.77 billion (+21.7%). 

Trade declined slightly in 2023 to US$139.42 billion (-5.9%), mainly due to changes in global commodity prices. 

The Driving Forces Behind China’s Investment in Indonesia 

Chinese companies are increasing their investments in Indonesia, driven by three key factors: 

• Rich Natural Resources: Indonesia has nickel, copper, and coal, which are essential for China’s industries. 
• Huge Consumer Market: With 270+ million people, Indonesia is a major market for Chinese products. 
• Strategic Location: Indonesia is a key trade hub for China’s Belt and Road Initiative (BRI) in Southeast Asia. 

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• Manufacturing Indonesia: What are The Benefits of Relocating Factory from China to Semarang?

Top Sectors Benefiting from China Investment in Indonesia

China’s investments in Indonesia are driving economic growth and industrial expansion across multiple sectors: 

Mining & Metals 

Investments in the production of nickel, alumina, and stainless steel include: 

• Tsingshan Holding Group: Largest stainless-steel production base. 
• Weiqiao Group: Largest alumina plant in Southeast Asia. 
• Morowali Industrial Park: Key hub for nickel processing. 

Manufacturing & Technology 

Chinese brands dominate the smartphone and e-commerce markets, including: 

• Xiaomi, OPPO, VIVO: Top smartphone brands in Indonesia. 
• Alibaba, Tencent, TikTok: Major players in e-commerce and fintech. 

Electric Vehicles (EV) & Clean Energy 

The sector is experiencing significant growth, supported by government incentives, which include: 

• BYD (US$1.3B): EV factory in Indonesia. 
• GAC Aion & Citroen: Investing in EV assembly and battery plants. 
• Xinyi Glass Holdings (US$11.5B): Solar panel material plant. 
• Government incentives: Import tax exemptions and lower luxury sales tax (15%). 

Infrastructure & Engineering 

Important projects aimed at enhancing connectivity in Indonesia include: 

• Highways & Bridges: Cileunyi–Sumedang–Dawuan Toll Road, Semarang–Demak Toll Road. 
• Power Plants: Meulaboh, Pangkalan Susu, Batang, Java 7, South Sumatra 1 & 8. 
• Jakarta-Bandung High-Speed Railway: First high-speed rail in Southeast Asia. 

How Investors Can Profit from China’s Investment in Indonesia 

China and Indonesia’s trade agreements and global partnerships provide numerous investment opportunities, making Indonesia a prime destination for foreign investors. 

China-ASEAN Free Trade Area (ACFTA) 

The China-ASEAN Free Trade Area (ACFTA) has significantly reduced trade barriers, with over 90% of goods now enjoying zero tariffs. The latest upgrade, ACFTA 3.0 (2024), focuses on the digital economy, green energy, and supply chain connectivity, creating new opportunities for business expansion in Indonesia. 

Regional Comprehensive Economic Partnership (RCEP) 

Indonesia joined the Regional Comprehensive Economic Partnership (RCEP) on January 2, 2023, benefiting from the gradual elimination of 92% of tariffs. This agreement simplifies trade, enhances market access for goods and services, and strengthens protections for e-commerce, SMEs, and intellectual property, making it easier for investors to operate in Indonesia. 

China-Indonesia Double Taxation Agreement (DTA) 

The China-Indonesia Double Taxation Agreement (DTA), which has been in effect since 2003, aims to reduce tax burdens on cross-border transactions. This agreement allows investors to benefit from a 10% withholding tax on dividends, interest, and royalties, making Indonesia a more appealing destination for foreign direct investment (FDI) and business expansion. 

Indonesia’s BRICS Membership & Investment Potential 

Indonesia’s recent BRICS Plus membership strengthens its economic position, as the bloc represents one-third of the global GDP. This partnership enhances investment prospects in energy, manufacturing, and technology while opening doors to new trade and funding opportunities. By leveraging BRICS networks, Indonesia can boost GDP growth and attract international investors. 

Future Outlook of China Investment in Indonesia 

China’s investment in Indonesia grew by 9.5% in 2024, reaching $8.1 billion, marking a strong recovery after a decline in 2023. Key highlights include: 

• Chinese investment has remained above $7 billion for three years, showing a strong economic partnership. 
• Capital inflows increased by 21% in the last quarter, bringing total investment from China to $36.4 billion since 2019. 
• China continues to focus on energy, infrastructure, and technology as both nations celebrate 75 years of diplomatic ties. 

New Investment Commitments & Future Growth 

• $7.5 billion in new commitments were secured during Indonesia’s visit to China in December 2023. 
• Chinese companies plan to expand in manufacturing, digital economy, and renewable energy. 
• Trade agreements and industrial growth will keep investment rising, creating new business opportunities. 

China’s investment in Indonesia is set to keep growing, reinforcing Indonesia’s role as a key destination for global investors. 

Establish Your Business in Indonesia with InCorp 

With government incentives and strategic trade partnerships, Indonesia presents opportunities for businesses looking to establish or expand their regional presence. Now is the ideal time for investors to leverage these advantages and enter the Indonesian market. 

For investors seeking to navigate Indonesia’s regulatory landscape efficiently, InCorp Indonesia (an Ascentium Company) can streamline the process: 

• Investor KITAS: Obtain the necessary visa to legally reside and operate in Indonesia. 
• Company Registration: Ensure compliance and a seamless business setup in Indonesia. 

Complete the form below to maximize the opportunities and benefit from Indonesia’s growing economic landscape.