Chinese investors who are targeting Indonesia to avoid US tariffs, tapping on the local market

Gao Xiaoyu, founder of an industrial land consulting company in Jakarta, has been flooded with calls from Chinese companies that want to expand or establish operations in Indonesia when they try to protect themselves from large -profit -profitable import tariffs.

The tariff rate of 19% US for goods from Indonesia is the same as Malaysia, the Philippines and Thailand, and exactly under 20% Vietnam. Chinese tariffs are currently exceeding 30%.

But Indonesia, the largest economy in Southeast Asia and the fourth most populous country in the world, has an advantage over its neighbors – the potential for broad consumer markets.

“We are quite busy lately. We have a meeting from morning to night,” said Gao, who founded his company PT Yard Eung Indonesia in 2021 with four employees and now has more than 40.

“Industrial park is also very busy.”

The Indonesian economy was expanded in 5.12% better than expected in the second quarter, the fastest speed in two years, government data showed last week.

“If you can build a strong business presence in Indonesia, you basically have won half of the Southeast Asian market,” said Zhang Chao, a Chinese manufacturer who sells motorcycle headlights in Indonesia, the third largest market in the world for motorbikes.

Vietnam and Thailand are one of the main beneficiaries of the first wave of diversification of Chinese companies abroad, but in the midst of the latest trading turmoil with the United States, other close neighbors benefit.

“There is always a synergy … with Chinese companies have the confidence to establish stores easily in Indonesia,” said Mira Arifin, the State of Indonesia in. “Indonesia has a collection of great talent with dynamic young demographics that encourage foreign investors to build scale quickly in this country.”

Indonesian President Prabowo Subianto has fought for the Chinese ties, visiting Beijing in November where he held talks with President Xi Jinping and welcomed Chinese Prime Minister Li Qiang to Jakarta in May.

Investment from China and Hong Kong to Indonesia rose 6.5% of the years to $ 8.2 billion in the first six months of 2025. Total FDI grew 2.58% compared to the same period to 432.6 trillion rupiah ($ 26.56 billion), and the government said they expect more investment in the second half of the year.

Massive consumer market

To be sure, the challenges of surviving in Indonesia, including regulatory obstacles, bureaucracy, restrictions on ownership, infrastructure that are lacking and lack of complete industrial supply chains that make China a “world workshop” for decades.

Some foreign investors have also caused concerns about the hearts of Prabowo Populis’s fiscal, when he pushed with his campaign promises, including the mainstay program to send free food to school children and pregnant women.

After falling in March to the lowest level against the US dollar since June 1998, the rupiah has been determined. Currently traded around 1% below its level at the end of last year.
In the area, more than 2,700 hectares (6,672 hectares) Subang Smartpolitan Industrial Park in West Java, executives said they had been flooded with questions from Chinese investors.

“Our cellphones, emails, and wechat are soon busy with new customers, agents who want to introduce clients,” as the US-Indonesia trade agreement was announced last month, said Abednego Purnomo, Vice President for sales, marketing, and tenant relations from Suryacipta Swadaya, Subang Smartpolitan operator.

“Incidentally, everything comes from China.”

Companies ranging from toy makers and textile companies to electric vehicle makers explore facilities, especially in West Java, the most populous provinces in Indonesia, which is a home for the Sea Port in Patibban.

Chinese demand has pushed the industrial and warehouse real estate prices by 15% to 25% years-year-year in the first quarter of 2025, the fastest increase in 20 years, according to Gao, from a land consultant company.

Rivan Munana, Head of Industrial and Logistics Services in Indonesia’s arm Property Colliers International Property Consultant said that there is an urgency among Chinese companies to move and companies get questions for industrial land “almost every day” ahead of the tariff agreement.

“Most of them (Chinese companies) are looking for direct opportunities. So, they want temporary land and buildings that can be used immediately, it is like an accident program,” Rivan said.

Zhang said he registered for a new four -storey office building in Jakarta in May with an annual rental of 100,000 yuan ($ 13,936), up 43% from last year, underlines hidden requests.

“Level 19%is lower than my hope. I think it will be 30%,” Zhang said, referring to the Indonesian tariff agreement and added that net profit margins in China could only be 3%.

“In Indonesia, it is relatively easy to reach a net profit margin of 20% to 30%.”

And then there is a collection of consumers that develop with household expenditure that forms more than half of Indonesia’s GDP. The gauge was slightly accelerated to 4.97% years-to-year in the second quarter, assisted by several general holidays.

“Indonesia is always prominent for different reasons. Outside the diversification of supply chains, Indonesia offers what some other people in the area can: the domestic market is large,” said Marco Foster, ASEAN Director at Dezan Shira & Associates, an investment consultation.
Source: Reuters