Chinese investors eyeing Indonesia to avoid US tariffs, tap local market

JAKARTA (Reuters) -Gao Xiaoyu, the founder of an industrial land consulting firm in Jakarta, has been inundated with calls from Chinese companies eager to expand or set up operations in Indonesia as they try to shield themselves from the United States’ hefty import tariffs.

The 19% U.S. tariff rate for goods from Indonesia is the same as for Malaysia, Philippines and Thailand, and just below Vietnam’s 20%. China’s rates currently exceed 30%.

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But Indonesia, Southeast Asia’s biggest economy and the world’s fourth most populous country, has an edge over its neighbours – the potential of its vast consumer market.

“We are quite busy these days. We have meetings from morning till night,” said Gao, who set up her company PT Yard Zeal Indonesia in 2021 with four employees and now has more than 40.

“The industrial parks are also very busy.”

Indonesia’s economy expanded at a better-than-expected 5.12% in the second quarter, the fastest pace in two years, government data showed last week.

“If you can establish a strong business presence in Indonesia, you’ve essentially captured half of the Southeast Asian market,” said Zhang Chao, a Chinese manufacturer who sells motorcycle headlights in Indonesia, the world’s third biggest market for motorbikes.

Vietnam and Thailand were among the major beneficiaries of the first wave of Chinese companies’ overseas diversification, but amid the latest trade turmoil with the United States, other near neighbours are benefiting.

“There has always been a synergy … with Chinese corporates having the confidence to set up shop with ease in Indonesia,” said Mira Arifin, the Indonesia country head at Bank of America. “Indonesia has a huge talent pool with a dynamic young demographic that encourages foreign investors to rapidly build scale in the country.”

Indonesian President Prabowo Subianto has championed China ties, visiting Beijing in November where he held talks with President Xi Jinping and welcoming the Chinese Premier Li Qiang to Jakarta in May.

Investment from China and Hong Kong into Indonesia was up 6.5% year-on-year to $8.2 billion in the first six months of 2025. Total FDI grew 2.58% over the same period to 432.6 trillion rupiah ($26.56 billion), and the government has said it expects more investments in the second half of the year.

MASSIVE CONSUMER MARKET

To be sure, challenges persist across Indonesia, including regulatory hurdles, bureaucratic red tape, ownership restrictions, deficient infrastructure and the lack of a complete industrial supply chain that made China the “workshop of the world” for decades.

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Some foreign investors have also raised concerns about the populist Prabowo’s fiscal prudence, as he pushes ahead with his campaign promises, including a flagship programme to deliver free meals to schoolchildren and pregnant women.

After falling in March to its lowest level against the U.S. dollar since June 1998, the rupiah has steadied. It is currently trading about 1% below its level at the end of last year.

At the sprawling, more than 2,700 hectare (6,672 acres) Subang Smartpolitan industrial park in West Java, executives said it had been inundated with enquiries from Chinese investors.

“Our phone, email and WeChat were immediately busy with new customers, agents wanting to introduce clients,” once the U.S.-Indonesia trade deal was announced last month, said Abednego Purnomo, vice-president for sales, marketing and tenant relations of Suryacipta Swadaya, Subang Smartpolitan’s operator.

“Coincidentally, all of them were from China.”

Companies ranging from toy makers and textile firms to electric vehicle makers are scouring for facilities, particularly in West Java, the most populous province in Indonesia, which is home to the Patimban deep sea port.

Chinese demand has pushed up prices of industrial real estate and warehouses by 15% to 25% year-on-year in the first quarter of 2025, the fastest rise in 20 years, according to Gao, from the land consulting firm.

Rivan Munansa, the head of industrial and logistics services at the Indonesian arm of global property consultant Colliers International said that there was an urgency among Chinese firms to move and the company was getting inquiries for industrial land “almost every day” in the run-up to the tariff agreement.

“Most of them (Chinese companies) are looking for immediate opportunities. So, they want land and a temporary building that can be used immediately, it’s like a crash programme,” Rivan said.

Zhang said he signed up for a new four-floor office building in Jakarta in May at an annual rent of 100,000 yuan ($13,936), up 43% from last year, underscoring the pent-up demand.

“The 19% level is lower than my expectation. I thought it would be 30%,” Zhang said, referring to Indonesia’s tariff deal and adding that net profit margins in China could be as little as 3%.

“In Indonesia, it’s relatively easy to achieve net profit margins of 20% to 30%.”

And then there’s the growing pool of consumers with household spending making up more than half of Indonesia’s GDP. The gauge accelerated slightly to 4.97% year-on-year in the second quarter, helped by several public holidays.

“Indonesia has always stood out for a different reason. Beyond supply chain diversification, Indonesia offers what few others in the regions can: a massive domestic market,” said Marco Foster, ASEAN director at Dezan Shira & Associates, an investment consultancy.

($1 = 7.1756 Chinese yuan renminbi)

($1 = 16,285.0000 rupiah)

(Reporting By Beijing Newsroom; Stefanno Sulaiman in Jakarta and Casey Hall in Shanghai; Additional reporting by Francesco Guarascio and Khanh Vu in Hanoi; Writing by Anne Marie Roantree; Editing by Kate Mayberry)

Chinese investors eyeing Indonesia to avoid US tariffs, tap local market

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