Why Indonesia Needs a China Strategy Now

For nearly eight decades, Indonesia has practised the principle of bebas aktif (free and active) in foreign policy and chosen not to choose. Whilst previous presidents Sukarno and Suharto plausibly harboured leanings in favour of one superpower in the Cold War over the other, their foreign policy fell short of overt alignment. Indonesia did not sign a defence pact with either the then Soviet Union or the US; its official state doctrine explicitly prescribed against binding military treaties with major powers.

In the past two decades, however, Indonesia’s relationship with China has advanced through a succession of labels of Beijing’s design, from a Strategic Partnership in 2005 to a Comprehensive Strategic Partnership in 2013, and now a “community with a shared future”. Meanwhile, Indonesia elevated its ties with Washington to a Comprehensive Strategic Partnership in 2023.

While a label may mark a relationship’s status, it does not indicate a strategy for managing it. China approaches Indonesia, as it approaches most nation-states, with a heavily formalised, incremental strategy couched in carefully curated joint statements, action plans and facilitated dialogue mechanisms. Indonesia, by contrast, has engaged China through ad hoc transactions and investment deals, leaving each administration to begin largely from where the last left off. So far, deepening economic ties have produced striking results in select sectors, with Indonesia attracting Chinese investment and trade and building large-scale infrastructure, including a multi-billion-dollar commodity value chain built on its mineral endowments.

Yet the absence of a coherent China strategy in recent years has produced inconsistent signals from Indonesia. With no mechanism for alignment, the palace, foreign ministry (Kemlu), the economic ministries and maritime agencies each engage Beijing from their respective positions, resulting in a national position that can be confusing. For instance, the two countries’ November 2024 joint statement’s language on “joint development in areas of overlapping claims” appeared to contradict Indonesia’s long-held position that it is not a party to the South China Sea disputes. Whether this was a diplomatic slip, a pragmatic concession or a misunderstanding warranted substantiation and clarification.

… Indonesia should develop a deliberate framework for engaging China that cultivates strategic agency.

Separately, the incumbent administration’s shifts in resource management policy — higher royalties, quota cuts and regulatory centralisation — triggered a rare public protest from the Chinese Chamber of Commerce in Indonesia (CCCI), warning that the changes threaten job security for some 400,000 workers (by their count) along the industrial chain.

Concerns about policy uncertainty are not limited to the Chinese community.  Select Japanese investors have privately voiced similar unease; some are weighing whether to scale back. Ratings agency S&P has expressed concerns about the predictability of policy decisions emerging from Indonesia. 

None of these concerns are innately intractable. With more transparent, open and focused messaging and policy implementation, most investors and businesses’ worries can be partially assuaged. Yet a deeper challenge remains: the absence of a China strategy renders Indonesia unable to articulate its core priorities in one of its most important bilateral relationships, including what is important or acceptable, where to cooperate and where to engage with caution.

The timing could hardly matter more. The US remains a security partner, yet much of what Indonesia seeks this decade has lost its American backing: USAID has been dismantled, Washington has withdrawn from the USD 20 billion Just Energy Transition Partnership and has left the Paris Accord. Instead, Indonesia has been met with tariffs and a trade agreement whose benefits are elusive.

Therefore, Indonesia should develop a deliberate framework for engaging China that cultivates strategic agency: the capacity to define and act on its own priorities. The strategy we propose rests on establishing a security foundation, pursuing a reciprocal economic relationship and closing a persistently large socio-cultural literacy gap at the official and society level.

The foundation would rest on preserving stability and confidence in Indonesia’s waters, so that sovereignty questions do not unsettle the wider relationship. This means maintaining the status quo in the North Natuna Sea through well-crafted diplomatic engagement, which behoves Indonesia to ensure that existing channels, such as the 2+2 Foreign and Defence Ministers’ dialogue, continue to produce concrete protocols for incident prevention and crisis communication.

On this would sit the possibility of a sustained and robust economic relationship. Indonesia should pursue a holistic growth strategy that integrates and localises emerging technology, innovative capacity, advanced manufacturing and human capital development, to bring Chinese innovation to the Indonesian population. On critical minerals, this means articulating clearer demands, such as on local talent development and technology transfer, so that Chinese investment genuinely accelerates Indonesia’s downstreaming objectives and Golden Vision 2045. A strategy would be the instrument for managing dependence — a genuine concern among parts of Indonesia’s elite — setting out what forms of reliance on Chinese technology and capital Jakarta will deepen versus which it will keep bounded, rather than deciding case by case. Establishing and communicating these standards and expectations would likely bolster confidence amongst Chinese businesses and operators in the country.

The widest gap, and the strategy’s third element, is arguably socio-cultural literacy. The world’s second (China) and fourth (Indonesia) most populous nation-states interact on a thin foundation of mutual understanding. Chinese communities have been present in the archipelago since at least the fifteenth century, yet political memories from 1965-66 and 1998 remain live reference points, and wariness of Chinese influence persists in Indonesian public opinion. This is visible in labour disputes at industrial parks and in surveys that register wariness of Beijing’s growing footprint.

The gap, though, runs largely one way. China has invested deliberately in understanding Indonesia; Indonesia has built far less of the institutional capacity to read China. This is not a matter of student numbers, which have risen, but of expertise embedded in the state: China specialists in Kemlu and the economic ministries, analysts who track Chinese decision-making and negotiators fluent in how Beijing thinks and operates. Closing the gap requires intentionally building literacy.

Policy Implications

A standalone China strategy for Indonesia need not contradict ASEAN coordination. On shared concerns such as maritime claims, digital governance and supply chain resilience, Indonesia should continue to leverage multilateral channels to amplify its voice. Yet ASEAN’s consensus-based model cannot substitute for bilateral clarity. An intentional framework for managing the relationship with Beijing is precisely what will keep a non-aligned power genuinely free and active.

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