China and Indonesia maintain one of Southeast Asia’s most consequential bilateral relationships, defined by deepening economic interdependence and persistent strategic friction. Over the past decade, trade and investment ties have expanded dramatically, political trust between leaders has grown, and multilateral cooperation has broadened. Yet overlapping maritime claims in the South China Sea, domestic sensitivities around Chinese investment, and the gravitational pull of U.S.-China great-power competition keep the relationship from ever settling into simple partnership. Indonesia’s approach has been to pursue cooperation and manage tensions simultaneously, a balancing act that shapes policy across everything from high-speed rail to nickel smelters to coast guard patrols.
Indonesia’s Hedging Strategy
Indonesia’s foreign policy rests on a principle enshrined since independence: “bebas dan aktif,” or “independent and active.” In practice, this means Jakarta refuses to formally align with either Washington or Beijing and instead channels its diplomacy through ASEAN, which sits at the center of a concentric-circle model of Indonesian engagement with the world. Researchers describe the result as a “double hedging” strategy, in which Indonesia simultaneously cultivates ties with both the United States and China to maintain regional stability and avoid being forced into a binary choice.1Issues & Studies. Indonesia’s Double Hedging Strategy toward the United States–China Competition: Shaping Regional Order in the Indo-Pacific?
This hedging is not passive. Indonesia actively shapes multilateral institutions, hosts summits, and proposes frameworks intended to keep great-power rivalry from destabilizing the region. The strategy creates room for Indonesia to accept Chinese infrastructure investment while also conducting military exercises with the United States, or to push back on Chinese maritime claims while welcoming Chinese vaccine shipments during a pandemic. It is a pragmatic posture, but one that requires constant calibration as the competitive dynamics between the two superpowers intensify.
The Jakarta-Bandung High-Speed Railway
No single project illustrates the complexity of China-Indonesia economic ties better than the Jakarta-Bandung High-Speed Railway. Launched in 2015 as a business-to-business venture between Chinese and Indonesian state enterprises, the rail line was supposed to be completed years before it finally opened in 2023. Along the way, it accumulated construction delays, spiraling cost overruns, and persistent questions about whether it would ever generate enough revenue to justify its price tag.2Jurnal Ilmiah Global Education. Economic Loss, Strategic Gain: The Geoeconomic Logic Behind China’s Investment in the Jakarta–Bandung High-Speed Rail Project (JBHSR) in Indonesia
By conventional investment logic, China should have pulled back. Instead, Beijing doubled down, restructuring the project’s financing and absorbing losses that would have sent a private investor running. Analysts frame this as a geoeconomic calculation: the railway’s value to China lies not in ticket sales but in the structural ties it creates. By converting financial risk into strategic leverage, China deepened Indonesia’s dependence on Chinese rail technology and construction expertise, making it harder for Jakarta to turn to alternative partners for future infrastructure. The project essentially trades short-term economic loss for long-term geopolitical influence in Southeast Asia’s largest economy.
For Indonesia, the railway has been both a prestige project and a cautionary tale. It demonstrates the benefits of Chinese capital and engineering capacity while also exposing the risks of cost escalation and debt restructuring in large-scale bilateral ventures. The experience has shaped Indonesian public discourse about how much Chinese infrastructure investment the country should welcome going forward.
Nickel, Smelters, and the Downstreaming Push
Indonesia holds some of the world’s largest nickel reserves, and the government’s signature industrial policy in recent years has been “downstreaming,” or requiring that raw minerals be processed domestically before export. Chinese investment has been central to making that policy work. Chinese firms have poured capital into building smelters in Indonesian mining regions, accelerating the shift from raw ore exports to processed nickel products that fetch higher prices on global markets.3Nation State: Journal of International Studies. The Impact of Indonesia-China Nickel Cooperations on Indonesia’s Economy and Environment
The cooperation has clear economic logic on both sides. Indonesia gains industrial capacity and moves up the value chain, while China secures a reliable supply of a mineral critical for electric vehicle batteries and stainless steel. But the partnership has also generated friction. Communities near smelter sites have raised concerns about environmental damage, water pollution, and deforestation. Labor disputes at Chinese-operated facilities have occasionally flared into protests. And some Indonesian policymakers worry about the degree to which the country’s nickel sector has become dependent on a single foreign partner for technology and capital.
The nickel relationship captures a recurring tension in China-Indonesia economic ties: the benefits are real and substantial, but they come with dependencies and local costs that fuel domestic debate.
Contested Waters Around the Natuna Islands
The most visible source of friction between Beijing and Jakarta is maritime. China’s expansive claims in the South China Sea, anchored by the so-called nine-dash line, overlap with Indonesia’s exclusive economic zone around the Natuna Islands. Although Indonesia is not technically a claimant in the core South China Sea territorial disputes, Beijing’s claimed maritime borders have included portions of Indonesian waters, leading to repeated incursions by Chinese coast guard and fishing vessels.4Port Management and Maritime Administration Journal. Indonesia’s Response to Sovereignty Threats in the Natuna Sea under UNCLOS 1982
These incursions create real security headaches. The Natuna Sea sits within Indonesia’s exclusive economic zone and is rich in fisheries and natural gas. Indonesian authorities face the challenge of asserting sovereignty over waters that a powerful neighbor treats as contested, while simultaneously maintaining the broader diplomatic and economic relationship with Beijing. The overlapping claims complicate enforcement operations and stretch the capacity of Indonesia’s maritime security apparatus.5Journal of Maritime Policy Science. Enhancing Maritime Security: Challenges and Strategies in Indonesia’s Natuna Sea
Indonesia has responded by reinforcing its military presence in the Natuna area, renaming the waters “North Natuna Sea” on official maps to underscore its sovereignty claim, and repeatedly invoking the 1982 United Nations Convention on the Law of the Sea as the legal framework that governs maritime boundaries. Jakarta has generally avoided escalatory rhetoric, preferring to manage the dispute through quiet diplomacy rather than public confrontation. But each new incursion tests that restraint and provides ammunition for domestic critics who argue that Indonesia is too deferential to Beijing.
ASEAN and the South China Sea Code of Conduct
Indonesia’s preferred arena for managing the South China Sea issue is ASEAN. As the bloc’s largest member and a non-claimant in the core disputes, Indonesia has positioned itself as an honest broker, pushing for a binding code of conduct that would govern behavior in the contested waters. After a high-level meeting in Singapore in late 2018, Jakarta expressed optimism that negotiations between ASEAN and China on a code of conduct could be completed within a few years.6JETISH Journal of Education Technology Information Social Sciences and Health. Overview of Indonesia’s Role in the South China Sea Conflict
Indonesia’s proposed negotiating text focused on five areas: the geographic scope of the code, dispute resolution mechanisms, obligations to protect the maritime environment, the role of outside parties, and the legal status of the code itself. The ambition was substantial. In practice, progress has been painfully slow. ASEAN’s consensus-based decision-making means that any single member can effectively block agreement, and China has shown limited urgency in finalizing a document that might constrain its freedom of action.
When Indonesia held the ASEAN presidency in 2023, hopes were high that Jakarta could use its convening power to push the code of conduct forward. The results were underwhelming. Researchers have concluded that Indonesia’s presidency failed to bridge the divergent interests of claimant states, non-claimant members, and China itself.7European Modern Studies Journal. The Role of ASEAN and Indonesia in South China Sea Dispute The episode underscored a recurring frustration: Indonesia’s multilateral instincts are genuine, but ASEAN’s institutional limitations and China’s strategic patience often conspire to produce stalemate.
From Jokowi to Prabowo
The transition from President Joko Widodo (Jokowi) to President Prabowo Subianto, who took office in October 2024, has introduced new dynamics into the relationship. Under Jokowi, China-Indonesia relations deepened across multiple dimensions, including growing political trust, expanded economic interdependence, increased security collaboration, and greater involvement of non-state actors in bilateral exchanges.8East Asian Policy. Evolving China-Indonesia Relations: From Jokowi to Prabowo Jokowi’s approach was pragmatic: accept Chinese investment where it served Indonesian development goals, manage maritime disputes quietly, and avoid being drawn into explicit alignment with either great power.
Prabowo has signaled a desire to reshape Indonesia’s diplomatic agenda and redirect its international engagement, but early assessments suggest he has struggled to chart a clearly different course. Analysts have noted that rather than resolving the long-standing tension in Indonesian foreign policy between engaging China economically and hedging against it strategically, Prabowo has deepened the ambiguity.9Journal of Current Southeast Asian Affairs. Discerning Prabowo Subianto’s foreign policy: Populist personalisation and problematic changes His personalistic style and populist instincts have made policy less predictable without making it more coherent. The fundamental question facing any Indonesian president, how to navigate the U.S.-China rivalry, remains unanswered under his leadership.
Vaccine Diplomacy and Pandemic-Era Cooperation
The COVID-19 pandemic opened an unexpected chapter in China-Indonesia relations. When global vaccine supplies were scarce in 2021, China’s Sinovac became the backbone of Indonesia’s early vaccination campaign. The cooperation was mutually beneficial: Indonesia gained access to vaccines at a time when Western alternatives were largely unavailable, while China demonstrated its capacity to act as a reliable partner in a health crisis. Researchers have described the Sinovac cooperation as an important instrument of vaccine diplomacy, one that not only accelerated Indonesia’s vaccination rollout but also strengthened bilateral trust.10PubMed Central. International cooperation during COVID‐19: Case study vaccine cooperation and its impact in Indonesia
The pandemic also revealed tensions beneath the surface. While the virus created new avenues for government-to-government cooperation, it worsened domestic relations between ethnic Chinese Indonesians and the broader population. Anti-Chinese sentiment, which has deep historical roots in Indonesia, found new expression in conspiracy theories about the virus’s origins and suspicion toward Chinese vaccines. However, this social friction did not translate into a broader political backlash that seriously damaged the bilateral relationship.11Journal of Current Southeast Asian Affairs. Indonesia’s Relations With China in the Age of COVID-19 The government maintained its cooperative posture with Beijing even as public sentiment shifted in more complicated directions.
Soft Power and Confucius Institutes
China’s soft power efforts in Indonesia extend well beyond government-to-government diplomacy. Confucius Institutes, the Chinese government-funded language and culture centers hosted at universities, have operated in Indonesia for years and serve as a frontline mechanism for shaping how Indonesians perceive China. Research into these institutions suggests they function as effective soft power agents, partly because they operate within local institutional structures rather than as purely top-down impositions. Their capacity to interact with Indonesian universities, student groups, and community organizations allows them to foster a culturally relevant and positive representation of China.12China Quarterly of International Strategic Studies. From Transnational to Local Networks
The effectiveness of these efforts is not unlimited. Indonesian public opinion toward China remains mixed, shaped by a combination of economic gratitude, sovereignty concerns, historical suspicion of ethnic Chinese influence, and generational shifts in media consumption. Younger Indonesians who consume Chinese pop culture and use Chinese-made apps may have different attitudes than older generations who remember the anti-Chinese violence of 1998. Soft power tools like Confucius Institutes operate within this complicated landscape, making incremental gains without fundamentally transforming how most Indonesians view their northern neighbor.
Subnational Cooperation and Industrial Parks
One of the less visible but increasingly important dimensions of the relationship is subnational cooperation. The “Two Countries, Twin Parks” initiative, which links industrial zones in China with counterpart parks in Indonesia, illustrates how bilateral ties are being woven at the provincial and local level. Rather than the kind of autonomous city-to-city diplomacy seen in other contexts, this initiative operates as what researchers call “orchestrated paradiplomacy,” where central governments mobilize provincial authorities and industrial estate operators to advance national strategic goals.13Journal of Paradiplomacy and City Networks. Orchestrated Paradiplomacy: A Multilevel Governance Analysis of the Indonesia-China ‘Two Countries, Twin Parks’ Initiative
The twin parks have created real economic opportunities by integrating transnational supply chains and channeling investment into Indonesian provinces that might otherwise struggle to attract foreign capital. But they have also generated governance headaches. Local authorities find themselves caught between the geoeconomic ambitions of national governments and the day-to-day reality of managing environmental impacts, labor disputes, and community complaints. Policy coordination gaps between central and local government have left some negative consequences, particularly environmental degradation, insufficiently addressed. The twin parks model reveals a broader pattern: the benefits of Chinese engagement tend to be measured at the national level, while many of the costs are felt locally.
Diaspora Networks in Disaster Response
The ethnic Chinese diaspora in Indonesia, long a politically sensitive community, has played a quiet but meaningful role in humanitarian cooperation between the two countries. Research into the aftermath of the 2004 Indian Ocean tsunami in Aceh found that Chinese diaspora networks served as a connective tissue between local communities, the Indonesian government, and humanitarian actors from mainland China. The diaspora’s local knowledge and contextual understanding of Indonesian society allowed it to bridge gaps that purely international relief organizations could not.14Disasters. Diasporas as a linchpin in local and international humanitarian action: a case study of the Chinese in Aceh following the 2004 tsunami
This role is complicated by Indonesia’s history of anti-Chinese discrimination and periodic violence against ethnic Chinese communities. The diaspora’s ability to function as a humanitarian bridge depends on local ethnic tensions being managed, and disaster settings can either ease or exacerbate those tensions depending on how relief is distributed and perceived. The Aceh case suggests that when handled carefully, diaspora engagement can strengthen both local resilience and bilateral goodwill. But the underlying ethnic dynamics mean that this channel is fragile and context-dependent in ways that purely governmental cooperation is not.
The diaspora dimension adds a layer to China-Indonesia relations that is easy to overlook from a purely strategic perspective. Economic agreements and maritime patrols get headlines, but the social fabric connecting Chinese and Indonesian communities shapes the domestic political environment in which all those higher-level decisions are made. When that fabric frays, as it did during some moments of the pandemic, the space for bilateral cooperation narrows even if neither government changes its official posture.