Indonesia-China Partnership: More Fragile Than It Looks

During the presidency of Joko Widodo, China became more central to Indonesia than at any point in the past. Widodo left office with China as Indonesia’s second-largest source of foreign investment. China also emerged as the largest export destination for Indonesia’s nickel-processing hubs that supported Indonesia’s ambition to build a downstream mineral industry.

Through these developments, Widodo transformed the Indonesia–China comprehensive strategic partnership from a largely diplomatic symbol into one underpinned by significant economic cooperation.

This impression appeared to deepen during the first year of Prabowo Subianto’s presidency. Jakarta seemed open to Beijing’s proposal for joint development in the South China Sea through a controversial joint statement. A 2+2 dialogue mechanism was established between their foreign and defence ministries in April 2025. Two months later, they inaugurated an integrated electric-vehicle battery manufacturing centre in Indonesia. Against this backdrop, some observers began to argue that Indonesia was ‘sleepwalking into strategic alignment with China’.

Yet the trajectory appeared to shift in the second year Prabowo’s presidency. In July 2025, the framework for a US–Indonesian reciprocal trade agreement was announced, with the Agreement on Reciprocal Trade signed in February 2026. Under the arrangement, US tariffs on Indonesian goods would decrease from 32 per cent to 19 per cent. Though the reduction was welcomed, the agreement was widely perceived in Indonesia as unfair. The decision raised questions about Indonesia’s bargaining power in negotiations with Washington while also casting uncertainty over the future of Indonesia–China strategic relations.

Three provisions of the agreement are particularly notable.

Source : Indonesia–China partnership more fragile than it appears