China's Strong Influence on Indonesia's Economy Assessed

A letter purportedly from China’s Chamber of Commerce and Industry (Kadin) to President Prabowo circulated on social media, prompting Finance Minister Purbaya Yudhi Sadewa, Energy and Mineral Resources Minister Bahlil Lahadalia, and Investment Minister Rosan Roeslani to meet dozens of Chinese investors. The investors complained about deteriorating investment conditions due to inconsistent policies, nickel quota cuts, rising royalty taxes, and extortion practices, leading to a postponement of mining royalty hikes.

Amid government efforts to build a foundation for natural resource revenue, the royalty delay signals caution in maintaining relations with China. This followed the ministers’ meeting with Chinese officials shortly after the letter emerged.

China is projected to be Indonesia’s main non-oil and gas export market in 2025, valued at US$46.47 billion, with iron and steel, mineral fuels, and nickel products dominating exports. China’s vital role as an investment partner is evident from investment realisations reaching US$34.3 billion from 2021 to 2025.

Data from the Ministry of Investment and Downstreaming/BKPM shows Chinese investments at US$2.2 billion in Q1 2026, a 22% year-on-year increase from the same period last year. Statistics Indonesia (BPS) data also shows China remained Indonesia’s top non-oil and gas import source from January to September 2025 at US$62.07 billion (40.68%), followed by Japan at US$11.01 billion (7.22%) and the US at US$7.33 billion (4.81%).

Imports from China are dominated by mechanical machinery, electrical equipment, and vehicles and parts. It is undeniable that China is now a key player in mineral processing, basic metal manufacturing, electric vehicles, and industrial zone development in Indonesia.