China and Indonesia Are Deepening a Strategic Partnership Beyond Trade

China and Indonesia are moving their relationship into a more strategic phase, expanding cooperation in defence, critical minerals, energy and technology as Jakarta seeks to maintain room for manoeuvre between Beijing and Washington.

The shift became visible on August 21, when Chinese Foreign Minister Wang Yi and Defence Minister Dong Jun met their Indonesian counterparts in Jakarta for the countries’ first high-level “2+2” dialogue. The talks covered political and security issues as well as economic cooperation, reflecting how closely Indonesia’s economic interests are becoming tied to its broader strategic positioning.

For Beijing, Indonesia is more than another major Southeast Asian trading partner. It is a resource-rich economy with access to nickel and other minerals critical to batteries, energy technologies and industrial supply chains. For Jakarta, China offers capital, infrastructure, technology and access to a vast market — but Indonesia is simultaneously trying to avoid becoming strategically dependent on any single power.

That balancing act is becoming more difficult as competition between China and the United States spreads from trade into technology, supply chains and security.

Minerals Are Becoming Strategic Infrastructure

The economic relationship is already substantial. Bilateral trade reached around $167 billion in 2025, while Chinese investment in Indonesia has expanded across infrastructure, manufacturing, energy and the electric-vehicle supply chain. China invested about $3.9 billion in Indonesia during the first half of 2026, according to Reuters.

The next stage is likely to focus less on simply increasing trade and more on controlling the industrial systems behind it.

Indonesia has some of the world's largest nickel resources, making it central to global battery production. Chinese companies have become deeply involved in processing those resources, while Chinese technology and capital have also helped build Indonesia's emerging EV industry.

The two governments now want to extend cooperation into energy, minerals, artificial intelligence, satellites, rail transport and green technologies. The breadth of the agenda suggests that economic relations are increasingly being treated as part of national resilience rather than as separate commercial policy.

This matters because critical-mineral supply chains are becoming a geopolitical asset. Beijing already occupies a powerful position across several stages of global clean-technology manufacturing. Indonesia, meanwhile, is attempting to move higher up the value chain by processing its resources domestically rather than exporting raw materials.

The result is a partnership in which China supplies technology and capital while Indonesia provides resources, market access and a strategic position at the centre of Southeast Asia.

Defence Cooperation Is Moving Closer to the Core

The most significant development is the expansion of military cooperation.

China and Indonesia agreed to strengthen defence ties and increase joint exercises and military exchanges. They are also planning a joint munitions factory in Indonesia, with Chinese technology transfers, which is expected to begin operating in 2027.

That represents a qualitatively different relationship from one based primarily on infrastructure investment or trade.

Indonesia has traditionally pursued a non-aligned foreign policy, seeking to preserve strategic autonomy rather than formally aligning with either Washington or Beijing. It continues to conduct defence exercises and security cooperation with the United States and Japan while simultaneously expanding military engagement with China.

Jakarta therefore appears less interested in choosing a side than in increasing the number of strategic options available to it.

For Beijing, however, closer defence ties with Indonesia carry wider regional significance. Indonesia sits astride major maritime routes linking the Indian and Pacific oceans and controls access to areas surrounding the Strait of Malacca, one of the world's most important shipping corridors.

Its position makes Jakarta particularly important as China seeks to strengthen relationships across Southeast Asia.

The South China Sea Remains the Strategic Test

The partnership is developing despite unresolved tensions in the South China Sea.

Indonesia does not consider itself a claimant in the same way as several other Southeast Asian states, but Chinese and Indonesian interests overlap around waters near Indonesia's Natuna Islands. Jakarta has repeatedly insisted on its sovereign rights in the area, while Beijing's expansive maritime claims have created friction.

That makes the new security dialogue particularly significant.

Rather than allowing maritime disputes to define the relationship, both governments are attempting to create mechanisms for managing them while expanding cooperation in other areas. The countries have discussed maritime security, navigation safety and marine research alongside broader economic and defence cooperation.

This is a distinctly Southeast Asian approach to great-power competition: avoid an open rupture, preserve economic links and build enough diplomatic flexibility to prevent any one dispute from determining the entire relationship.

Jakarta Wants Options, Not Alignment

Indonesia's strategy is increasingly shaped by a world in which economic and security relationships are difficult to separate.

The United States remains an important partner for Indonesia in defence and trade, while China is deeply embedded in Indonesia's investment and industrial landscape. Japan is also a major economic and security partner. Jakarta's challenge is to extract benefits from all three without allowing cooperation with one to undermine its sovereignty or relations with the others.

The new China-Indonesia dialogue therefore matters beyond the bilateral relationship.

It signals that Beijing is continuing to build influence through a combination of investment, industrial cooperation, technology and security partnerships rather than relying on military power alone. Indonesia, for its part, is using China's interest in its resources and strategic position to accelerate domestic industrial development while keeping its foreign policy formally non-aligned.

The outcome could be a model increasingly visible across the Global South: states refusing to choose between competing powers, while using rivalry among them to expand their own economic and strategic room for manoeuvre.