How China and Indonesia are forging a green partnership

With the world's largest reserves of nickel, a young workforce, and improving investment policies, Indonesia stands as a go-to destination for China's overseas industrial and energy investments.

Data from China's General Administration of Customs indicates that bilateral trade hit $150.3 billion in the first 11 months of 2025. This already exceeds the full-year figure for 2024.

Indonesia prioritizes a strategy known as down-streaming. This approach ensures that raw materials are processed locally rather than exported in their raw form. For China, Indonesia offers a reliable source of critical minerals and a strategic manufacturing base.

The electric vehicle (EV) supply chain is a major field for cooperation. In June, a consortium led by a subsidiary of Chinese battery giant CATL broke ground on a $6 billion project. This venture integrates the entire process from nickel mining to battery production. It aims to power up to 300,000 EVs every year. Once the project is fully operational, it is expected to create 8,000 direct jobs and 35,000 indirect positions.

Market demand is also rising. Sales of fully electric vehicles in Indonesia grew by 267 percent in the first half of 2025, reaching 35,749 units. Chinese brands currently account for the vast majority of these sales.

Demographics provide another advantage. Indonesia has a median age under 30. This creates a large consumer base and a youthful labor force.

Additionally, to attract foreign investment, the Indonesian government has progressively lowered market access thresholds and streamlined approval procedures in recent years.

Moreover, Indonesia has secured a tariff trade deal with the United States, with a final rate of 19 percent—the lowest among its Southeast Asian peers. This competitive rate makes the country an attractive export hub.

China-Indonesia cooperation also extends to renewable power. Indonesia currently depends heavily on coal but plans to reach net-zero emissions by 2060. Chinese companies are supporting this goal through various infrastructure projects.

The Lumut Balai Phase II geothermal project is a prime example. Jointly developed by PowerChina and an Indonesian state-owned company, the plant began commercial operations in July. It serves about 80,000 households, and the annual reduction in carbon dioxide emissions is equivalent to planting 12 million trees.

From 2020 through the first half of 2025, Chinese investment in Indonesia totaled $35.3 billion, growing at an average annual rate of 31 percent, according to Indonesian government data. Much of it flowed into sectors like energy, manufacturing, logistics and digital technology which are crucial to Indonesia's industrial upgrade.

Moving beyond traditional trade, the bilateral relationship is now characterized by deep industrial integration, offering a tangible blueprint for cooperation between large developing economies in the Global South.