Sino-Indonesian Relations: Getting Closer or Further Apart?

By Siwage Dharma Negara, the Senior Fellow and Co-coordinator of the Indonesia Studies Programme, and the Coordinator of the APEC Study Centre,
and Leo Suryadinata, the Visiting Senior Fellow, ISEAS – Yusof Ishak Institute

China’s trade and investment in Indonesia have grown substantially since the early 2000s but the Indonesian public does not share Jakarta’s desire to wholeheartedly embrace Beijing, write Siwage Dharma Negara and Leo Suryadinata.

Now that Chinese President Xi Jinping has secured a historic third term, Indonesian President Joko Widodo’s (Jokowi) aspirations for closer trade and investment ties with Beijing are likely to boost Beijing’s quest as a dominant regional, if not global, power. In the past decade especially, Sino-Indonesian trade values and direct investment have increased dramatically. China has become a critical foreign investment source for Indonesia, second only to Singapore.

Presidents Xi and Jokowi are continuing the trend initiated after both countries resumed direct bilateral relations in 1990. Under Susilo Bambang Yudhoyono (Indonesia’s president from 2004-2014), Jakarta signed a Strategic Partnership agreement with Beijing in 2005, then the two countries upgraded this to a Strategic Comprehensive Partnership in 2013.

Jokowi, whose flagship project to move his country’s capital to “Nusantara” (or IKN) in East Kalimantan will outlast his presidential tenure and those of his next few successors, likely sees China not only as a potential investment partner to help fund critical infrastructure in IKN, but also to foster downstream industrial development.

On the eve of the 20th CPP Congress in Beijing last month, China Global Television Network (CGTN) interviewed Jokowi for the first time. Jokowi was asked about his expectation for the Congress and his impression of President Xi. Jokowi hoped the Congress’s outcome would benefit the Chinese people and contribute to the stability of the region and the world. He also noted that Xi had successfully reduced poverty in China, a goal that Jokowi has for Indonesia.

When asked about Sino-Indonesian cooperation, especially under the Belt and Road Initiative (BRI), Jokowi noted that the Jakarta-Bandung High-Speed Rail (HSR) is a “flagship of Indonesia-China cooperation”. He had personally checked the progress of the HSR three times since work on it commenced in 2015. Jokowi had earlier said that he and President Xi would ride the HSR together when Xi visits Indonesia for the G20 Leaders’ Summit (15-16 November 2022 in Bali). However, the two leaders will now observe a HSR test “ride” via Zoom on 16 November. Jokowi is probably disappointed that he lost this photo opportunity with Xi, but it is likely that scheduling difficulties and not more serious reasons led to its cancellation.

A more balanced view, however, would be to see this resistance as a bulwark preventing Jakarta’s total co-optation into Beijing’s orbit.

Where Beijing is concerned, the HSR Project is important for Xi to showcase China’s technological aid to developing countries, as Indonesia’s is the first HSR project in Southeast Asia under the BRI. For Jokowi, the HSR is one of his pet projects initiated during his first term, a symbol of his infrastructure-led development agenda.

During the CGTN interview, Jokowi hoped that bilateral cooperation on infrastructure would continue beyond the HSR. On 16 March 2022, while on the phone with Xi, Jokowi had mentioned possibly cooperating with China to build Nusantara. Without mentioning specifics, Jokowi wished for China’s continued support for Indonesia’s plans for regional economic corridors and green industrial parks.

Indonesia had previously proposed various BRI-funded projects, which have not received the green light from Beijing. These proposed projects are concentrated in the outer islands, such as North Sumatra, North Kalimantan, North Sulawesi and Bali. Most of them involve seaports, industrial parks, and tourism-related facilities. Possibly, these projects may not fit with China’s broader BRI goals or may be potentially loss-making.

The absence of approval could indicate that Beijing is waiting for clearer and more viable plans from Indonesia, which is still conducting various feasibility studies as requested by Beijing.

Chinese investment in Indonesia is concentrated in the mining and electricity generation sectors. China helped to build many of Indonesia’s coal-fired power plants. Yet China’s global commitment to stop its funding of coal-fired power plants worldwide will affect Indonesia’s long-term electricity development plan. Around 65% of Indonesia’s planned coal-fired power plants scheduled to be built from 2021-2030 will have to be cancelled if China withdraws financing.

For all the apparent warmth at the elite level, there are indications from a recent survey that show how the Indonesian elite perception of China and of Sino-Indonesian ties can differ from that of the general public, as the latter still bear reservations towards China and the Indonesian Chinese. In July 2022, the ISEAS-Yusof Ishak Institute commissioned LSI to conduct the Indonesia National Survey Project 2022 (INSP2022) across Indonesia. This survey, details of which will be published in December 2022, interviewed more than 1,600 respondents face-to-face, on the economy, social and cultural spheres, and domestic and international politics. The research sample was representative of the general public in terms of gender, age, regional, religious and ethnic diversity in Indonesia.

Overall, the findings revealed lingering negative perceptions towards China and in part, the minority ethnic Chinese in Indonesia (or “Indonesian Chinese”). For instance, when asked “Do you think the rise of China will have a positive or negative impact on Indonesia?”, about 25.4 per cent of respondents perceived it negatively, while 20.6 per cent rated it positively. The majority or 29.4 per cent was ambivalent. 24.6 per cent said they “did not know” the answer, which can be interpreted either as ignorance of international affairs or reluctance to share one’s actual view.

Only 30 per cent of respondents believed that Indonesia could “benefit greatly” by having close economic ties with China. In contrast, 46 per cent believed that Indonesia could benefit a lot by having close economic ties with Saudi Arabia. (Saudi Arabia, Turkey, and Singapore were the three most admired countries.) There is a noticeable drop in public’s positive feeling or admiration towards China, with around 66 per cent of respondents saying that they admire China, compared to 76.7 per cent who said so five years ago (when a similar survey was last conducted). Nevertheless, 72 per cent of respondents said that China was a country that is important to Indonesia (still a drop from 2017’s survey result of 77.3 per cent).

Source: National Survey Project conducted by (Lembaga Survei Indonesia/LSI) for ISEAS-Yusof Ishak Institute, on 20-30 May 2017 and 21-28 July 2022, summarised by authors. No citation allowed; forthcoming publication of survey December 2022.)

Moreover, about 41.5 per cent of respondents thought China’s BRI megaproject created a debt trap for other countries, including Indonesia. Approximately 41 per cent of respondents believed that Indonesian Chinese were still loyal to China. One explanation for such perceptions could be that Indonesian Chinese business people are still seen as the main actors collaborating with mainland Chinese investors on joint projects in Indonesia.

The Indonesian public’s persistent negative perceptions of China’s investment efforts and residual distrust of the Indonesian Chinese community may continue to limit what Jokowi and his successors can do to strengthen bilateral economic relations. In the worst-case scenario, this distrust can serve as a brake on Indonesia’s own economic prospects. A more balanced view, however, would be to see this resistance as a bulwark preventing Jakarta’s total co-optation into Beijing’s orbit.

This article originally appeared on the ISEAS – Yusof Ishak Institute's Fulcrum on 11th November 2022 .