China Issues Stern Warning to Indonesia: Economy Set to Become More Difficult

Jakarta, CNBC Indonesia – The Chinese government has just announced a downward revision of its economic growth target to the lowest level in three decades. The development could have large spillovers for Indonesia’s economy.

The announcement was made at the annual ‘Two Sessions’—the two most important political events in China comprising the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC). In this forum, the direction of economic policy, politics, and development priorities are usually announced to the public and the world.

On this occasion, China’s government set its 2026 Gross Domestic Product (GDP, PDB) growth target at around 4.5% to 5%. The target was announced by Premier Li Qiang, the second-highest official in China, as he read the government work report at the opening session of the NPC in the Great Hall of the People, Beijing, on Thursday (5 March 2026).

The target marks the lowest since 1991 and is the first downward revision of growth projections since 2023. The revision essentially reflects Beijing’s acknowledgement that domestic headwinds have not eased.

In its work report, the Chinese government pointed to several issues weighing on the economy: weak domestic demand, a prolonged property sector downturn, and the debt burden of local governments. These factors make the Chinese recovery more difficult, hence the target has been set more realistically than last year.

Simultaneously, China also finds itself in a challenging external environment. Global uncertainty has risen, while geopolitical tensions and trade issues again pose risks to the economy and trade of the Middle Kingdom.

The government also said it would prepare economic policies to respond to dynamics of tariffs from the United States, which add to uncertainty for the outlook of the economy and trade.

What does this mean for Indonesia? A slowdown in China cannot be taken lightly, because China remains Indonesia’s largest trading partner. Data from the Indonesian Central Statistics Agency (BPS) shows China was Indonesia’s largest export market for non-oil and gas products, amounting to USD 64.82 billion or about 24% of Indonesia’s 2025 non-oil exports.

In other words, when China’s economy slows, the fastest impact is often seen in demand for Indonesian exports. In terms of exports, the biggest pressure could come from commodities and intermediate goods closely tied to Chinese manufacturing activity. When China’s growth slows, demand for raw materials for manufacturing, construction, and investment typically falls as well.

This is crucial for Indonesia because the two countries have a strong trade relationship across mining commodities, industrial inputs, and certain manufactured products.

Put differently, a slowdown in China could hold back Indonesia’s export momentum, weigh on commodity prices, and ultimately dampen external-sector drivers of domestic growth.

Beyond exports, another channel to watch is investment. In recent years, China has emerged as one of Indonesia’s largest foreign investors, especially in downstream, manufacturing, and resource-based projects.

Data from the Investment Coordinating Board (BKPM) show that Chinese investment in Indonesia remained high, reaching USD 7.5 billion in 2025. Although it fell from USD 8.1 billion in 2024, the figure confirms that China remains a key source of foreign investment supporting industrial development and the downstream agenda.

Thus, when China’s economy slows, the risk is not limited to trade but also to investment growth. If Chinese companies adopt a more cautious approach to capital expenditure, new projects and expansions in Indonesia could be delayed. This is particularly relevant for sectors that have attracted Chinese investors, such as mineral processing, manufacturing, energy, and industrial zones. Although it does not imply that investment will stop, a slower Chinese economy could make the investment flow more selective and less aggressive than before.

Senior economist and former finance minister, Chatib Basri, has warned that the impact of China’s economic slowdown on Indonesia is quite tangible. His calculation suggests that every 1 percentage point slowdown in China’s economy could shave about 0.3 percentage points off Indonesia’s growth, given that China is Indonesia’s largest trading partner.

Therefore, the downward revision of China’s growth target has real implications and serves as a crucial signal that risks to exports, commodity prices, and investment inflows warrant closer monitoring. The deeper the Chinese slowdown, the greater the potential spillovers into Indonesia’s economy.