ASEAN Beat | Diplomacy | Southeast Asia

Indonesia’s Emerging China Dependencies

Is this the beginning of the end of Jakarta’s truly “free and active” foreign policy? 

Indonesian President-elect Prabowo Subianto (left) shakes hands with Chinese President Xi Jinping during a visit to Beijing, Apr. 1, 2024.

As ASEAN’s only G20 member, a critical global mineral supply chain node, and occupying strategic maritime space, massive Indonesia is an especially consequential “fulcrum of order” in the Indo-Pacific and Global South. Like most ASEAN states, it remains committed to strategic autonomy while notably drifting toward China. However, Jakarta’s shift is especially consequential. 

“Free and active,” or bebas aktif, remains Indonesian foreign policy’s sincerely prized core. Yet beneath this high-level continuity, Beijing’s influence has rapidly grown, especially economically, overtaking the United States and key alternative partners like Japan and South Korea. Indonesia is not yet China-aligned, but the material bases for a “free and active” foreign policy are eroding. 

Jakarta’s preferred orientation requires not just intent but robust options. China’s role within Indonesia’s economy may become so indispensable and entrenched that Jakarta cannot meaningfully tell Beijing no, hollowing out free-and-active rhetoric. Indonesia’s high-priority, ambitious growth goals and mixed economic picture sharpen this dilemma. Given its strategic importance, a functionally China-aligned Indonesia would have profound regional consequences.

Indonesia’s Distinct China Shift

Within Southeast Asia, Indonesia’s China shift is distinct. The Anatomy of Choice Alignment Index shows that among major ASEAN states – Indonesia, Vietnam, Singapore, Philippines, Malaysia, Thailand – Jakarta moved furthest toward China relative to the United States from 1995 to 2024. The shift was overwhelmingly economically driven, with inbound investment flows decisively shifting in Beijing’s favor. 

Lowy’s Southeast Asia Influence Index adds Japan, South Korea, and Australia to the picture. With the possible exception of Malaysia, Indonesia’s overall and economic balance of influence is the most tilted toward China. An American-led allied bloc can elsewhere match Chinese influence, with Vietnam’s exports markets, Singapore’s financial and commercial relationships, or the Philippines security ties acting as potent “ballast” against Chinese predominance. Indonesia’s figures raise greater questions of multi-alignment’s continued plausibility. Beijing now decisively out-invests Seoul and Jakarta’s traditional economic partner, Tokyo. 

China’s economic influence extends beyond topline figures and highly visible infrastructure projects that earlier would have been won by Japanese competitors. In future-facing sectors such as electric vehicles (EVs), mineral processing, telecommunication infrastructure, and renewable energy, Chinese capital and firms are increasingly shaping the ecosystem and beating out American, Japanese, and Korean competitors. 

EVs and Growing Economic Dependencies

The EV sector best exemplifies these “full-stack dependencies” within Indonesia, in which Chinese entities occupy the entire value chain of a critical sector, setting the tech standards, providing hardware and software, and financing. China is thereby positioned as the significant player in the Indonesian automotive sector’s future.

Indonesia’s Presidential Regulation No.79 of 2023 was designed to accelerate battery EV adoption, and provide tax and import duty incentives for building domestic production facilities for the complete EV. Chinese automotive manufacturers were uniquely capable of and prepared to leverage those incentives as a strategic entry point to rapidly penetrate the domestic market. This policy-industrial nexus allowed Chinese brands to competitively price EV and related products against Japanese and Korean counterparts. Chinese firms could swiftly dominate consumer market share and reshape Indonesian market habits before their local assembly manufacturing facilities became fully operational.

Japanese brands like Toyota had dominated through manufacturing, investment, and dealer networks built up over decades. While EV sales were a minor component of the total car market, Japanese dominance held there as well. Since Chinese entry, however, its brands overwhelmingly captured 2025 Indonesian EV wholesales, with BYD taking nearly 50 percent, even as EV sales surged to over 10 percent of the automotive market. Japan still leads the overall market, but its share in Indonesia and ASEAN overall has fallen, with Honda posting particularly severe drops. Essentially, China is beginning to displace Japan. 

This emerging Chinese dominance extends beyond downstream car sales. Recognizing Indonesia’s world-leading nickel reserves are vital to stainless steel and EV batteries, Chinese capital and firms like Tsingshan flowed heavily into the larger supply chain, supplying upstream extracting tools for raw ore and beyond. 

Unlike the European Union, China did not treat required domestic processing and refining as an obstacle. Instead, Chinese firms deployed the required complex high-pressure acid leaching (HPAL) technology, developed multi-billion dollar local suppliers, such as smelting operations within industrial parks, and now dominate the upstream and midstream sectors. China’s presence has again outmatched Indonesia’s alternative partners. After South Korea’s LG Energy Solution withdrew from the main position of a massive EV battery project last year, China’s Huayou stepped in as the replacement investor.   

China has thus capitalized upon regulatory openings to build a full-stack ecosystem within Indonesia, linking upstream battery raw material processing with downstream EV market dominance within an entrenched structural dependency. Critically, this playbook is not purely extractive, including institution building and human capital development via technology transfer, joint vocational training, and........

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