Indonesia and China have a rapidly growing ties

China’s growing role in Indonesia’s economy is now becoming a crucial source of growth for the two nations.

China has emerged as the third largest source of investment in Indonsesia, just behind Singapore and Hong Kong SAR. The combined Hong Kong and Chinese mainland investments accounted for 25 % of the total overesas invbestment in Indonesia in 2021. This only behind Singapore which accounts for 30.2 % of overesas investment, and far above Japan at 7.3 % and the USA at 8.2 %. The rapid growth in Chinese investment is a recent phenomena which only took off in the period 2016-2019.

China and Indonesia have also had significant growth in bilateral trade, which reached $78.4 billion USD in 2020, and by 2021 this grew to over $121 billion, making China the largest trade partner to Indonesia. Not only does bilateral trade far outstrip that with countries such as Japan, the USA and the European Union, it is even larger that Indonesia’s bilateral trade with its ASEAN partners.

This relationship dates back to the establishment of diplomatic relations between China and Indonesia in 1950, and strengthened in the late 1980s.

Indonesia enthusiastically welcomed the “Belt and Road Initiative” announced by President Xi Jinping in 2013, and proposed several projects to be financed and constructed within the framework of the Chinese initiative. Among those projects, the most important one was the Jakarta-Bandung High Speed Rail (JBHSR) construction on Java island, that should be completed in 2023.

The Indonesian government has pursued a prudent approach by the regarding the financing of BRTI projects. Indonesia preferred not to take direct loans from China but favored a business to business approach. In 2019, President Widodo proposed to China to set up a special BRI fund for Indonesia. In 2012, Indonesia and China already established a Maritime Cooperation Fund to finance joint project. On June 2017, China agreed to increase this fund in addition to the China ASEAN Maritime Fund.  See the Global Times interview in with the Indonesian Ambassador in May 2022.

What the future holds, in the emerging multipolar world however, is all but controversial. We are entering the 21st Asian Century. Today China’s investments are helping Indonesia construct some of the largest mega projects in its history, through China’s Belt and Road Initiative. The video notes the declining importance of the traditional relationship with Japan, anmd the growth of ties between Indonsesia and China, as China becomes more important in South East Asia.

The following video is from Behind Asia, 2 Jun 2022.

Further reading: Global Times, May 19, 2022, ‘Exclusive Interview with Indonesian Ambassador: China-proposed BRI and Indonesia’s GMF highly synergized, prompting more mutual and win-win exchanges’.