Summary of Key Points
Recently, a letter highlighting the challenges faced by Chinese companies doing business in Indonesia has sparked significant discussion, with Indonesian lawmakers calling for fair law enforcement by the government. Xu Longchuan, an Indonesian-Chinese entrepreneur and known as the "Father of Industrial Real Estate," gave an interview in which he expressed understanding for the concerns of Chinese companies due to policy changes, particularly in the mining sector. He noted that there are clear channels for communication. When investing in Indonesia, Chinese companies should choose safe areas and reliable local partners, and the government should enhance its dialogue with the business community. Xu advised against pulling out investments due to short-term fluctuations, to avoid repeating the mistakes of Japanese companies. Instead, he suggested focusing on developing the downstream industrial chain. Future cooperation could focus on emerging sectors such as AI, semiconductors, and healthcare, while also emphasizing the importance of local talent development and cultural adaptation.
Detailed Analysis
1. Chinese Companies in Indonesia: Achievements and Challenges
China is Indonesia's largest trading partner, with bilateral trade reaching $167.4 billion in 2025, and it remains the primary source of foreign investment. Chinese companies have made significant contributions to Indonesia's economy, utilizing local nickel resources to help the country become a global leader in stainless steel and electric vehicle battery production. They are also involved in bauxite processing and photovoltaic manufacturing, with the Jakarta-Bandung high-speed rail being a landmark project. However, recent policy changes in the mining sector have caused difficulties for Chinese companies. The nickel mining quota was reduced from 379 million wet tons to 260-270 million tons in 2026, leading to decreased and more expensive raw materials. Additionally, the calculation method for benchmark prices has changed, requiring additional costs for previously free by-products like cobalt and iron, significantly increasing business expenses.
2. Guidance for Avoiding Pitfalls: Choosing the Right Locations and Partners
Xu Longchuan emphasized that when investing in Indonesia, it is crucial to select the right locations and partners. His Jababeka Group operates three national-level economic special zones (such as the Kendal Industrial Park), which offer stable management frameworks and help companies navigate frequent policy changes. For example, many Chinese battery companies have settled in the Kendal area, with hundreds of hectares of land already reserved for 2027.
3. Indonesia's Need for Development: Stay Invested Instead of Withdrawing
The Indonesian government is changing policies to encourage foreign investment to move from extracting raw materials to developing downstream industries such as batteries and finished stainless steel products, aiming to strengthen the local economy. Xu warned against following the example of Japanese companies during the financial crisis in 1998, which led to a shift in investment patterns in favor of Korean companies, who now have greater influence in Indonesia's industrial sector. He suggested that Chinese companies with capital and market access should continue investing, especially in downstream industries.
4. Opportunities in Emerging Sectors
Xu Longchuan identified several promising areas for cooperation, including AI, semiconductors, and healthcare:
- AI and Semiconductors: Indonesia has a demand for data centers and semiconductors, and China's rapid technological advancement can help in implementing these technologies at lower costs. Joint digital industrial parks could be established to integrate the supply chain.
- Healthcare: There is a high demand for imported medical equipment and drugs in Indonesia, and Chinese companies can fill this gap.
- Textile Industry: This is also a popular area for Chinese investment.
5. Investing in Indonesia: Be Grounded and Understand Local Context
Xu stressed the importance of understanding local realities, including language, business practices, and cultural customs. He pointed out that while Indonesia has significant potential, it also faces challenges such as poor infrastructure and limited worker skills. Before investing, it is essential to thoroughly understand these factors. He also highlighted the importance of talent development, mentioning his President University in Indonesia, which has trained over 2,000 Chinese students and serves as a bridge between Chinese and Indonesian businesses.
This analysis provides a clear overview of the current situation, challenges, and opportunities for Chinese companies operating in Indonesia, making complex economic issues accessible to a broader audience.