JAKARTA: As US-China trade tensions and Washington’s sweeping new tariffs disrupt global supply chains, Indonesia has a window to position itself as a new destination for foreign investment in manufacturing and industry.
Indonesia has seen foreign direct investment rise amid the “China Plus One” shift as companies diversify beyond China to other countries as an alternative production base, giving Jakarta fresh momentum in developing domestic industry.
“We are benefitting from the current geopolitical situation, particularly in capital-intensive industries and data centres (DCs),” Deputy Industry Minister Faisol Riza said.
“Many contracts are being signed even before new facilities are built.”
Indonesia has already become a relocation destination for Chinese companies for some time, Faisol said, describing the recent trend as a direct benefit of the US-China trade war.
The influx fit with the country’s downstream and industrialisation push, he added.
Besides manufacturing, Chinese companies showed interest in dimethyl ether gasification and waste-to-energy projects, both projects managed by state asset fund Danantara. Chinese firms are participating in at least six of those projects.
Investment interest from India was also growing as they were seeking greater access to Indonesia’s domestic market. Similar to China, Indian firms also eyed Indonesia as an export base.
Mainland Chinese investment reached US$3.9bil in the first half this year, more than double the US$1.8bil recorded in the same period last year, while investment from Hong Kong surged from US$2.3bil to US$7.6bil, according to Investment Coordinating Board data.
Combined investment from mainland China and Hong Kong reached US$11.5bil in the first half of 2026, nearly three times the US$4.1bil recorded a year earlier.
Sanny Iskandar, deputy chair for agrarian affairs and spatial planning at the Indonesian Chamber of Commerce and Industry (Kadin), said that diversifying production bases could help global companies to mitigate losses if disruptions occurred at another production hub, a strategy many are pursuing today.
Access to raw materials and proximity to export markets are also key considerations, helping manufacturers lower operating costs when relocating or diversifying production bases, he added.
Wiraraja Madura Industrial Estate has sealed a partnership with China’s Guangdong (Fenyong) Asean Industrial Park to develop export-oriented manufacturing clusters in Madura, East Java, under the Two Countries Twin Parks framework.
The planned factories will produce chocolate, mattresses, textiles, yarn and other labour-intensive goods.
The collaboration would “create greater opportunities for Chinese companies to expand into Indonesia”, said Akhmad Ma’ruf Maulana, chairman of the Indonesian Industrial Estate Association and president director of Wiraraja.
Batam, a free-trade zone in the Riau Islands just 30 minutes from Singapore, has also emerged as another major destination for Chinese investment, particularly in the technology sector.
BP Batam recorded 17.4 trillion rupiah in investment realisation in the first quarter of 2026, double the figure recorded a year earlier.
In May, Indonesia attracted a US$5bil Chinese DC project in Nongsa Park, backed by Chinese DC giant Range Intelligent Computing Technology, which marked the firm’s first overseas expansion.
The island has also drawn US technology investment, with Oracle planning up to US$6bil in cloud region infrastructure and Nvidia.
Singapore’s DayOne and Australian artificial intelligence (AI) firm Firmus Technologies also announced a 360-megawatt AI DC in June, expected to rank among the Asia-Pacific’s largest.
Indonesia’s investment policy “is not specifically targeting China”, said Krisna Gupta, a senior fellow at the Centre for Indonesian Policy Studies or CIPS.
Chinese companies were “simply more active”, partly because they were seeking to diversify around United States tariffs, a trend that “does not necessarily amount to transshipment”, he said, referring to a practice in which a shipment is rerouted through another country before reaching its final destination to conceal its country of origin.
Efforts to curb transshipment could instead disrupt international trade more broadly, hurting Indonesia and other US-dependent exporters while raising costs for US buyers reliant on global supply chains, Krisna said.
Apple Inc, whose products are assembled largely by Chinese manufacturing partners, had previously lobbied Washington for tariff relief while diversifying its supply chain beyond China.
Its suppliers have also expanded production in Batam, where a local partner manufactures AirTag and AirPod components.
The concern gained renewed urgency after a White House report titled The Great Transshipment Scam published on Aug 13, alleged Chinese-origin goods were being routed through lower-tariff jurisdictions before entering the US market under new national identities.
The 25-page report claimed the United States loses “tens of billions of dollars” annually from illegal transshipment through more than 40 lower-tariff jurisdictions. — The Jakarta Post/ANN
