The 2024 Outlook for Chinese Investment in Indonesia

Chinese Investment in Indonesia: An Outlook for 2024

  • InCorp Editorial Team
  • 14 August 2024
  • 5 minute reading time

China’s investment in Indonesia has steadily increased, establishing it as a key player in the archipelago nation’s economic landscape. This guide explores the outlook for Chinese investment in 2024, the driving forces behind this economic partnership, promising sectors for investment, and the challenges to consider.

Why Does China Invest in Indonesia?

Several factors drive China’s growing investment in Indonesia:

  • Resource-Rich Economy: Indonesia boasts abundant natural resources, including nickel, copper, and coal, which are attractive to Chinese industries.
  • Large and Growing Market: Indonesia’s population of over 270 million presents a vast consumer market for Chinese goods and services.
  • Strategic Location: Indonesia’s strategic location in Southeast Asia is a vital trade and logistics hub for China’s Belt and Road Initiative.

Additionally, the investment in Indonesia is part of a broader trend of increasing China’s investment in Asia, showcasing the country’s expanding economic influence.

The Importance of Chinese Investment in Indonesia

The Ministry of Investment/Investment Coordinating Board (BKPM) reports that Chinese investment in Indonesia reached USD 30.2 billion from 2019 to Q1 2024, during which 21,022 projects were collaborated.

Riyatno, Deputy for Investment Cooperation at the Ministry of Investment/BKPM, noted that China has ranked among Indonesia’s top five foreign investment sources over the past five years. In 2023, China was the second-largest investor in Indonesia, following Singapore.

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The 2024 Outlook for Chinese Investment in Indonesia

In 2023, Southeast Asia attracted about 50% of China’s regional investments, a 27% increase from the previous year, with Indonesia receiving around USD 7.3 billion.

During a bilateral meeting on September 8, 2023, Indonesian President Joko Widodo and Chinese Premier Li Qiang announced a new USD 21.7 billion investment pledge from China, covering diverse sectors such as e-commerce, industry, agriculture, and technology.

This follows a previous commitment of USD 44.89 billion in July 2023. The agreement also includes the Financing Facilitation for the China-Indonesia “Two Countries, Twin Parks” initiative, reinforcing their economic ties under the Belt and Road Initiative (BRI). China’s investments in Indonesia are notable in several areas:

Manufacturing

Chinese foreign direct investment (FDI) has significantly bolstered Indonesia’s nickel market dominance, with major projects like the Morowali Industrial Park. 

Chinese companies in Indonesia, including Yadea and BYD, are also rapidly entering the electric vehicle (EV) market, enhancing the country’s industrial capabilities and infrastructure.

Transportation Infrastructure

China has made substantial contributions to Indonesia’s transportation sector, exemplified by the Jakarta-Bandung high-speed railway, a USD 7.3 billion project. This high-speed rail, operational since October 2023, has reduced travel time between Jakarta and Bandung from over three hours to 40 minutes.

Renewable Energy and EVs

Chinese investment is crucial for Indonesia’s energy transition. In 2023, deals worth USD 12.6 billion were signed, focusing on EV batteries and clean energy projects. Xinyi Glass Holdings announced a USD 11.5 billion investment in a quartz sand processing plant vital for solar panels.

In January 2024, BYD established a USD 1.3 billion EV plant in Indonesia, significantly boosting its EV industry and reinforcing its position in the global market.

Challenges to Invest in Indonesia for Chinese Investors

The Government of Indonesia has implemented several policies to boost investment, such as revising 72 laws perceived as barriers to investment through an omnibus law approach and introducing the Online Single Submission (OSS) system to streamline business permits.

However, these efforts have remained relatively high in foreign investment flows into the country. The BKPM has identified five significant challenges deterring investors:

  • Complex regulations
  • Difficulties in land acquisition
  • Uneven public infrastructure
  • Inadequate tax incentives
  • A shortage of skilled labor

Further challenges include navigating a new investment landscape in a democratic nation where political actors frequently change. 

Moreover, the Chinese government’s focus on supporting state-owned enterprises over private-sector ventures requires Chinese companies to manage political uncertainties in Indonesia independently.

Future Outlook of Chinese Investment in Indonesia

Despite the existing challenges, China remains a key investor in Indonesia, significantly impacting the country’s foreign direct investment sector. As of 2024, the Indonesian government actively promotes 81 industrial projects to attract Chinese investors. 

These projects, listed in the Regional Investment Potentials, cover sectors such as economic zones, real estate, tourism, agro-industry, renewable energy, and infrastructure.

The total investment needed for these projects across all 34 provinces is around IDR 239 trillion (approximately USD 14.7 billion). This substantial investment reflects Indonesia’s commitment to strengthening its economic relationship with China.

Moreover, the Indonesian government focuses on projects and other investment opportunities in renewable energy, resource processing, and Nusantara Capital City (IKN) development. 

Critical tourism investments include Lake Toba, Borobudur, Labuan Bajo, Mandalika, and Likupang. 

As both nations work to enhance investment and explore new opportunities, they are set to deepen their collaboration and drive sustainable development.

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Capitalize on Chinese Investment in Indonesia with InCorp

In recent years, Chinese investment has significantly contributed to Indonesia’s economic growth, underscoring Indonesia’s status as a lucrative destination for investors. With numerous opportunities across various sectors, Indonesia attracts substantial foreign interest.

InCorp is your gateway to success in Indonesia’s thriving investment landscape. We specialize in supporting Chinese companies looking to capitalize on this exciting market.

Here’s how InCorp simplifies your Chinese investment journey in Indonesia:

  • Company Registration: We navigate the intricacies of company registration in Indonesia, ensuring your business is set up correctly and compliant.
  • Business Licensing: Our team expedites the business licensing process, saving you time and allowing you to focus on launching your operations quickly.

Unlock the opportunity for your Chinese investment by filling out the form below.

Pandu Biasramadhan

Senior Consulting Manager at InCorp Indonesia

An expert for more than 10 years, Pandu Biasramadhan, has an extensive background in providing top-quality and comprehensive business solutions for enterprises in Indonesia and managing regional partnership channels across Southeast Asia.

Get in touch with us.

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Frequent Asked Questions

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

There are two main types, namely, primary business licenses and non-primary business licenses. The primary ones commonly apply to various industries, such as general and industrial business licenses. Additional non-primary ones are included, depending on the operations of your business. Examples of non-primary business licenses are operational and commercial licenses.

Yes, you must apply for it to be able to issue work permits for your foreign employees. This permanent business license is also a prerequisite for the applications for other business licenses and import licenses.