Over more than seven decades — 76 years in April, to be exact — Indonesia and China's relationship has evolved from political engagement into one of the most important economic partnerships in Asia. Today, China is Indonesia's largest trading partner, a major source of investment, and a key participant in Indonesia's industrial transformation. As both countries celebrate this milestone, the question is no longer whether the relationship is important, but how it can be strengthened to ensure resilience and shared prosperity in an increasingly uncertain global economy.

International trade has long been a powerful engine of economic growth. For developing countries such as Indonesia, trade provides access to larger markets, foreign investment, technology, and industrial upgrading. For China, economic cooperation with Southeast Asia contributes to regional stability and sustained growth. The Indonesia–China relationship demonstrates how two countries with complementary economic structures can generate mutual benefits through trade and investment.

According to data from the United Nations Comtrade database, Indonesia's total exports reached $281.72 billion in 2025, with the export basket led by mineral fuels, oils, and distillation products at $45.11 billion, followed by animal and vegetable fats and oils (primarily crude palm oil) at $34.36 billion, and iron and steel at $27.97 billion. China was the single largest destination, absorbing $67.04 billion, or approximately 23.8 percent of Indonesia's total exports. The United States ranked second with $31.02 billion (11.0 percent), followed by India ($18.32 billion, 6.5 percent), Japan ($17.61 billion, 6.3 percent), and Singapore ($13.70 billion, 4.9 percent).

The large share of exports bound for China reflects the strong complementarity between the two economies. China's industrial sector demands precisely coal, palm oil, iron and steel, and nickel products that Indonesia produces in abundance, feeding China's massive industrial machine.

Indonesia's exports to China are no longer limited to raw commodities. While coal and palm oil remain important, Indonesia has increasingly exported higher-value products such as iron and steel, nickel-based products, electrical equipment, and processed minerals. This transformation reflects Indonesia's downstream industrialization policy, known as hilirisasi, which encourages domestic processing instead of exporting raw materials.

The nickel industry is an example. Indonesia possesses the world's largest nickel reserves and has attracted billions of dollars of investment into smelters and battery production facilities. Many of these projects have involved Chinese investors and technology providers. As a result, Indonesia has become an emerging hub in the global electric vehicle battery supply chain.
China has also become an essential supplier for Indonesia's industrial development. In 2025, Indonesia imported approximately $242 billion worth of goods, of which $88 billion, or more than 36 percent, came from China — making China Indonesia's largest import source. These imports consist largely of machinery, industrial equipment, electronics, and components that are crucial for Indonesia's manufacturing expansion.

This interdependence has generated significant benefits. Indonesia has gained access to technology, capital, and industrial expertise, while China has secured reliable access to important resources and a growing consumer market. The relationship has contributed to economic growth, job creation, and industrial upgrading in both countries.

The gravity model of trade

Trade economists have long understood that proximity and economic size drive commerce. The gravity model of trade — which predicts that countries with larger economies and shorter distances trade more heavily — explains much of the Indonesia-China dynamic. China's economy is roughly 10 times larger than Indonesia's and the two nations share maritime borders. That they trade extensively is not surprising.

What requires closer examination is the quality of that trade relationship. Indonesia has made genuine progress in moving up the value chain. The downstream (hilirisasi) policy — which restricts raw mineral exports and forces domestic processing — has transformed the export basket. Ferroalloys from nickel, refined palm oil, and manufactured goods now constitute a meaningful share of shipments to China. Indonesia's growing industrialization requires Chinese made smelters, conveyors, power generation equipment, and electronic control systems.

A positive agenda for the next 76 years

As both nations celebrate 76 years of diplomatic relations, the foundation for even greater cooperation is solid. While China remains Indonesia's largest trading partner, it is important to deepen cooperation in ways that enhance resilience for both countries.

For Indonesia, this means leveraging economic engagement with China to strengthen domestic productive capacity. Investments should increasingly focus on technology transfer, workforce development, research collaboration, and local industrial upgrading. Indonesia's objective should build capabilities that allow domestic firms to participate more actively in regional and global value chains.

For China, supporting Indonesia's industrial development aligns with its own long-term interests. A more prosperous and industrialized Indonesia represents a larger market, a more reliable economic partner, and a stronger contributor to regional stability. Cooperation that promotes sustainable development, green technology, renewable energy, and advanced manufacturing can create long-term benefits.

At the same time, both countries should continue expanding people-to-people exchanges, academic cooperation, and policy dialogue. Sustainable partnerships are built not only on trade statistics, but also on mutual understanding. Greater interaction between universities, think tanks, and businesses can strengthen trust and generate innovative solutions for a shared future.

The 76th anniversary of Indonesia–China diplomatic relations arrives at a pivotal moment. The global economy is becoming more fragmented, geopolitical competition is intensifying, and supply-chain security has become a strategic concern for many countries. In this environment, the success of bilateral partnerships will increasingly depend on their ability to withstand shocks and adapt to change.

Indonesia and China have already demonstrated that economic cooperation can deliver substantial benefits. The next stage of the future of Indonesia-China relations should focus on transforming interdependence into resilience.

By promoting industrial upgrading, technology transfer, and balanced economic cooperation, both countries can ensure that their partnership remains a source of stability and prosperity for decades to come.

The author is a development planner at Indonesia's Ministry of National Development Planning and is currently affiliated with the School of Public Policy and Management at Tsinghua University.

The views don't necessarily reflect those of China Daily.

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