Chinese money flows to Indonesia as Tariff shield

Chinese investors are considering Indonesia as they sought ways to increase investments at home and avoid Trump’s tariffs. Mira Arifin, Indonesia’s country head at BoA, said there is an agreement allowing Chinese investors to set up businesses easily in Indonesia.

Gao Xiaoyu, the founder of PT Yard Zeal, claimed he was swamped by calls from Chinese firms looking to expand or establish operations in Indonesia. She said her industrial land consulting firm was busy with all-day meetings. Abednego Purnomo, the Vice President for Sales, Marketing, and Tenant Relations at Suryacipta Swadaya, said his company’s phone, WeChat, and email were busy with new customers and agents introducing clients. They all came from China after the U.S.-Indonesia trade deal reported by Cryptopolitan last month. 

Gao pointed out that most Chinese investors sought to shield themselves from the hefty U.S. tariffs by setting up shop in Indonesia. The U.S. has set a tariff rate of 19% for Indonesia’s imports, while China’s rate exceeds 30%, as reported by Cryptopolitan. Indonesia is Southeast Asia’s largest economy, the fourth most populous country in the world, and has a huge consumer market. Government data showed that the country’s economy beat expectations to grow by 5.12% in Q2 2025. It was the fastest growth rate in nearly two years.

Arifin says Indonesia is young and talented

BoA’s Arifin said Indonesia has a large talent pool and a young population that attracted the country’s FDI (foreign direct investment). Zhang Chao, a Chinese motorcycle headlight manufacturer, believes that establishing a “strong presence in Indonesia” will essentially capture nearly 50% of Southeast Asia’s market.

China and Hong Kong investments into Indonesia surged 6.5% YoY to $8.2 billion in H1 2025. The total Foreign Direct Investment (FDI) grew to $26.56 billion over the same period, an increase of 2.58%. The Indonesian government expects more investments from both countries in H2 2025.

Rivan Munansa, the Head of Industrial and Logistics Services at Indonesia’s Colliers International branch, said most Chinese companies sought to move to Indonesia in search of opportunities. He added that in the “crash program,” companies wanted land and temporary buildings for immediate use. Munansa said his company is receiving industrial land inquiries almost daily. Zhang disclosed that he had acquired a four-floor building in Jakarta at an average annual rent of $13.936K. He added that it was easy to hit 20% to 30% profit margins in Indonesia, while the net profit margin could go as low as 3% in China.

However, Indonesia is allegedly plagued by persistent challenges, such as bureaucratic red tape, a lack of sufficient infrastructure, and regulatory hurdles. The country also lacks a complete industrial supply chain. An aspect that has made China the world’s workshop for over a decade. Meanwhile, the ASEAN Director at Dezan Shira & Associates, Marco Förster, argued that Indonesia offered something others in the region did not: “a massive domestic market.”

Chinese demand heats up West Java real estate

Chinese companies, ranging from textile firms and EV makers to toy manufacturers, are scrambling for facilities in West Java. Gao claimed that the demand pushed up prices for warehouses and real estate by 15% to 25% YoY in Q1 2025. Household spending has also increased to over 50% of Indonesia’s GDP due to the growing consumer pool.

However, a recent AidData report showed that Indonesian political and economic elites are concerned about competition from lower-quality and cheaper Chinese products. They’re also worried Indonesia could become overly dependent on Chinese investments in strategic sectors like nickel. Indonesia accounts for 63% of the world’s nickel supply, but China controls nearly 75% of Indonesia’s smelting operations. The Natuna Sea maritime disputes also challenge the leaders’ pursuit of economic ties with China.

Indonesia’s President, Prabowo Subianto, recently made remarks that showed his country was keen on forming trade ties with China. However, his first visit to China was followed by a trip to Washington, showing that he wanted to make friends with both economic powers. Senior Policy Specialist at AidData, Bryan Burgess, stated that China contributed more capital to Indonesia than Australia and the U.S. over the past two decades.

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