Why Relocating to Indonesia is a Smart Strategy for Chinese Companies

The trade war between the United States and China began after Donald Trump took office as US President and introduced high tariffs on Chinese products. These tariffs made it more expensive for Chinese companies to export to the US, forcing many to look for new countries to move their factories to. 

This trend has grown quickly over the past year. Many Chinese businesses are shifting production to ASEAN countries like Vietnam, Thailand, Malaysia, and Indonesia. These nations offer lower labor costs, easier market access, and favorable investment conditions. 

While countries like Vietnam have already seen large investments, Indonesia has a big chance to catch up and become a leading manufacturing hub in Southeast Asia.  

Why Chinese Manufacturers Should Relocate to Indonesia Amidst the US Tariffs 

With its low labor costs, strategic location, large workforce, and improving investment climate, Indonesia stands out as a strong alternative for companies looking to avoid heavy tariffs and reduce dependency on China. 

Avoiding US Tariffs and Trade Pressures 

With ongoing US-China trade tensions, many Chinese manufacturers have faced heavy tariffs on their exports to the United States. These policies have increased costs and hurt profit margins for many Chinese companies. By relocating production to Indonesia, businesses can sidestep US tariffs and continue exporting to America with fewer trade barriers. 

Indonesia is not yet entangled in a trade war with the US like China is. This makes it a safer and more cost-effective base for exporting to American markets. 

Strategic Location in Southeast Asia 

Indonesia sits at the heart of ASEAN, one of the most dynamic economic regions in the world. Companies can easily access key markets across Asia, Australia, and Africa from Indonesia. The country also has access to major shipping routes, which makes it ideal for global logistics and supply chains. 

As a member of trade agreements like RCEP (Regional Comprehensive Economic Partnership), Indonesia has broader market access across Asia. 

Competitive Labor and Operating Costs 

Labor in Indonesia is significantly cheaper than in China, especially in industrial zones outside Jakarta. Manufacturing wages remain low, and land or factory rental costs are affordable. This creates a perfect setup for companies aiming to reduce production expenses without compromising scale or quality. 

Government Incentives and Support 

The Indonesian government actively encourages foreign investment. It offers a range of incentives, tax breaks, and fast-track permits for industries such as electronics, automotive, textiles, and renewable energy. 

Indonesia has already developed several Special Economic Zones (SEZs) to attract overseas manufacturers. These SEZs are complete with infrastructure, logistics hubs, and support services. 

Rising Domestic Market Potential 

Indonesia has an export base and a huge consumer market. With over 270 million people, rising incomes, and a growing middle class, companies relocating here gain access to export channels and a large domestic customer base. 

Political Stability and Pro-Investment Climate 

Indonesia is considered one of the more stable democracies in Southeast Asia. Its government has shown a long-term commitment to economic growth, infrastructure development, and improving ease of doing business. 

China+1 Strategy Alignment 

More and more companies are following the “China+1” strategy—keeping some operations in China while shifting others to nearby countries to reduce risk. Indonesia is perfectly positioned to play this role. It offers a reliable alternative close to China and other Asian supply networks. 

READ MORE:

• Relocating to Indonesia: A Guide for Taiwanese Business
• Unlocking China’s Investment Potential in Indonesia
• China’s Investment Prospects in Indonesia’s Leading Exports

Best Places for Chinese Companies to Relocate in Indonesia 

As more Chinese companies explore Indonesia as a relocation option, choosing the right location becomes key. Not all parts of Indonesia offer the same infrastructure, support, or cost benefits. Below are some of the most attractive regions for manufacturing investment: 

Batam 

Batam is one of Indonesia’s most popular industrial zones. Located just a short ferry ride from Singapore, it offers excellent access to international shipping routes, skilled labor, and special tax incentives. It’s ideal for electronics, shipbuilding, and light manufacturing. 

Java Island 

Java, especially West Java (Bekasi, Karawang, Cikarang) and Central Java, is home to many of Indonesia’s largest factories. These areas have well-developed industrial parks, better roads, and easy access to ports. Central Java, in particular, is gaining attention for its lower labor costs than Jakarta while offering quality infrastructure. 

Surabaya and East Java 

Surabaya is Indonesia’s second-largest city and a major port. It is an excellent location for logistics and export-oriented industries. East Java is developing quickly with government support, offering competitive land prices and improving connectivity. 

North Sumatra (Medan) 

Medan, the capital of North Sumatra, is emerging as a new trade and industrial hub. Its access to the Port of Belawan is well-positioned for exports to India, China, and the Middle East. The government is also investing heavily in transportation and energy infrastructure in this region. 

Kalimantan 

With the upcoming development of Nusantara, Indonesia’s new capital in East Kalimantan, there is growing interest in this region. Although still developing, Kalimantan offers long-term potential, especially for energy, mining, and resource-based industries. 

Relocate Your Chinese Companies to Indonesia with InCorp 

Indonesia offers a smart, cost-effective alternative for a Chinese manufacturer looking to relocate operations and protect its global market access. However, moving your business across borders involves legal hurdles and local regulations—that’s where InCorp Indonesia (an Ascentium Company) steps in. 

We specialize in helping Chinese companies make a seamless transition into the Indonesian market, with services including: 

• Business Setup: We handle the complete business registration process so you can start operating without delays. 
• Business License: We assist in acquiring the permits and approvals needed to run your factory or export operation legally and efficiently. 

Our experts understand the unique needs of Chinese investors and manufacturers. We offer on-the-ground expertise in regulatory compliance and workforce guidance, allowing you to concentrate on growth rather than paperwork. Fill out the form below to move forward with confidence.