Mutual prosperity

Indonesia-China economic partnership illustrates how high-level opening-up can generate tangible benefits for both parties

China’s high-level opening-up has become one of the defining features of the contemporary global economy. At a time when geopolitical tensions and protectionist tendencies challenge multilateralism, China has reaffirmed its commitment to institutional openness, trade and investment liberalization, and deeper financial integration. The Recommendations of the 20th Central Committee of the Communist Party of China for Formulating the 15th Five-Year Plan (2026-30) for National Economic and Social Development explicitly emphasize “promoting high-standard opening-up and creating new horizons for mutually beneficial cooperation”. This direction reflects not only domestic reform priorities, but also China’s intention to remain embedded in regional and global economic integration.

China’s opening-up has evolved from export-oriented industrialization toward a more comprehensive, rules-based and institutionally aligned model. The recommendations call for aligning with high-standard international economic and trade rules, expanding service sector openness, widening free trade networks and facilitating two-way investment flows.

China remains the world’s largest trading nation in goods, with total trade exceeding $6 trillion in 2025. At the same time, it is a major source of and destination for foreign direct investment. Participation in the Regional Comprehensive Economic Partnership reinforces China’s integration with the Association of Southeast Asian Nations, Japan, the Republic of Korea, Australia and New Zealand, forming the largest free trade bloc in the world by GDP and population.

China has been Indonesia’s largest trading partner for more than a decade. Bilateral trade exceeded $150 billion in 2025, supported by exports of coal, palm oil, nickel, and, increasingly, processed mineral products.

One of the most transformative areas of cooperation is nickel downstreaming. Chinese investment in smelters and battery material plants in Sulawesi and Maluku has accelerated Indonesia’s industrial upgrading. This supports Indonesia’s strategy to move up the electric vehicle value chain, from raw ore exporter to a producer of intermediate and high-value battery components.

Infrastructure cooperation has also advanced. The Jakarta-Bandung High-Speed Railway, launched in 2023, is Southeast Asia’s first high-speed rail project. Beyond reducing travel time between the two cities to roughly 40 minutes, it supports urban development, logistics efficiency and technology transfer.

Digital economy cooperation is expanding as well. Chinese technology companies have invested in Indonesia’s e-commerce, fintech and digital infrastructure ecosystems. Indonesia’s digital economy is projected to reach $360 billion by 2030, creating new channels for cross-border services and trade.

High-level opening-up is not limited to goods, infrastructure or investment. Monetary and financial cooperation plays a critical role in sustaining economic integration. Cooperation between Bank Indonesia and the People’s Bank of China represents a strategic dimension of Indonesia-China economic ties.

In 2009, both central banks established a bilateral currency swap agreement, which has been renewed and expanded multiple times. The swap arrangement allows the exchange of local currencies to support trade settlement and maintain financial stability during periods of market stress. In recent renewals, the swap line has reached the equivalent of hundreds of billions of renminbi, signaling mutual trust and financial cooperation.

In addition to swap lines, Indonesia and China have strengthened cooperation in local currency settlement. Greater use of the renminbi and rupiah in bilateral trade reduces dependence on third-party currencies and mitigates exposure to global dollar liquidity cycles. For Indonesia, this diversification enhances monetary resilience. For China, it supports the broader objective of the internationalization of the renminbi, as emphasized in the recommendations.

Both central banks also cooperate in macroprudential dialogue, financial market development and payment system integration. As China advances its cross-border renminbi payment infrastructure and digital currency experimentation, regional cooperation frameworks offer opportunities for interoperability and financial innovation. This central bank collaboration underscores that high-level opening-up is not merely commercial, but also institutional and systemic.

The recommendations also reiterate the importance of high-quality Belt and Road cooperation. In Indonesia, Belt and Road cooperation extends beyond railways to ports, power plants and industrial parks.

Importantly, recent years have seen green development receive greater emphasis. China has pledged to stop building new coal-fired power projects abroad and has shifted toward renewable energy cooperation. This aligns with Indonesia’s energy transition agenda and supports climate commitments under the Paris Agreement.

Collaboration in solar panel manufacturing, battery production and electric vehicles positions both countries within emerging green supply chains. Such cooperation reflects China’s emphasis on green transformation and clean energy development.

China’s high-level opening-up aligns with broader trends in Asia. Supply chains are becoming more regionalized, with ASEAN playing a larger role in intermediate production. The RCEP is institutionalizing this integration, reducing tariffs and harmonizing rules of origin.

China is simultaneously repositioning itself as both a production hub and a consumption market. The recommendations highlight boosting domestic demand and expanding imports. For Indonesia, this creates sustained demand for commodities, food products, tourism and services.

Moreover, as global economic gravity shifts toward Asia, financial and monetary cooperation, including swap lines and local currency settlement, provides a stabilizing framework for regional trade and investment flows.

China’s high-level opening-up reflects a strategic choice to remain integrated with the global economy while deepening domestic reform. The emphasis on institutional opening, financial innovation, sustainable development and multilateral cooperation signals continuity in its approach.

For Indonesia, engagement with China has delivered measurable gains in trade expansion, infrastructure development, industrial upgrading and financial cooperation. The partnership between the two sides’ central banks adds a macro-financial dimension that strengthens resilience and facilitates long-term economic ties.

While challenges remain, including managing trade structure imbalances and ensuring environmental safeguards, the overall trajectory demonstrates that pragmatic, rules-based cooperation can yield mutual benefits.

In an era marked by uncertainty, China’s high-level opening-up, combined with Indonesia’s proactive engagement, illustrates how regional integration and economic globalization can still generate shared growth and stability.

The author is an assistant professor at the Faculty of Economics and Business at the Indonesian International Islamic University, and a member of the advisory board at the Reform Initiatives, Indonesia.

The author contributed this article to China Watch, a think tank powered by China Daily. The views do not necessarily reflect those of China Daily.

Contact the editor at editor@chinawatch.cn.