As the only G20 member within the Association of Southeast Asian Nations (ASEAN), Indonesia serves as a critical node in global mineral supply chains and occupies vital maritime space. This makes the nation a consequential "fulcrum of order" in the Indo-Pacific and the Global South. While Jakarta remains officially committed to its long-standing "free and active" or bebas aktif foreign policy, the country is experiencing a notable drift toward China. This shift is particularly significant because Beijing has rapidly expanded its economic influence, effectively overtaking the United States and traditional partners such as Japan and South Korea.
Although Indonesia is not yet formally aligned with China, the material foundations supporting its "free and active" stance are eroding. Jakarta’s preferred diplomatic orientation requires robust options, yet China’s role in the Indonesian economy is becoming so entrenched that it may eventually limit Jakarta’s ability to decline Beijing’s influence. This dilemma is sharpened by Indonesia’s ambitious growth goals and complex economic landscape. A functionally China-aligned Indonesia would carry profound regional consequences.
Data from the Anatomy of Choice Alignment Index reveals that among major ASEAN states—including Vietnam, Singapore, the Philippines, Malaysia, and Thailand—Indonesia moved the furthest toward China relative to the United States between 1995 and 2024. This shift is overwhelmingly driven by economic factors, with inbound investment flows tilting decisively in Beijing's favor. The Lowy Southeast Asia Influence Index, which incorporates data on Japan, South Korea, and Australia, confirms that Indonesia’s economic balance of influence is among the most tilted toward China in the region. While an American-led allied bloc provides a counterweight in countries like Vietnam, Singapore, or the Philippines, Indonesia’s current trajectory raises significant questions regarding the long-term viability of its multi-alignment strategy.
China’s economic influence is particularly visible in future-facing sectors such as electric vehicles (EVs), telecommunications, and renewable energy, where Chinese capital and firms are consistently outperforming American, Japanese, and Korean competitors. The EV sector exemplifies these "full-stack dependencies," with Chinese entities controlling the entire value chain, from setting technical standards to providing hardware, software, and financing. Recognizing that Indonesia’s world-leading nickel reserves are vital for EV batteries, Chinese firms like Tsingshan have invested heavily in upstream ore extraction and midstream processing. Unlike the European Union, China did not view Indonesia’s domestic processing requirements as an obstacle. Instead, Chinese firms deployed complex high-pressure acid leaching (HPAL) technology and built multi-billion dollar smelting operations. When South Korea’s LG Energy Solution withdrew from a major EV battery project last year, China’s Huayou stepped in as the replacement investor.
This Chinese framework is reinforced by two broader advantages: the ability to accept thinner margins and faster localization timelines compared to Japanese rivals, and a focus on development in outer islands like Sulawesi and North Maluku. By supporting infrastructure and human capital development through technology transfer and vocational training, China has successfully generated local buy-in, further cementing its role as the primary architect of Indonesia’s industrial future.
Indonesian President-elect Prabowo Subianto (left) shakes hands with Chinese President Xi Jinping during a visit to Beijing, Apr. 1, 2024.
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