The ongoing U.S.–China trade tensions and rising production costs in China have prompted a significant shift in global supply chains. Chinese manufacturers, in search of new strategic locations to mitigate tariffs and geopolitical risks, are increasingly turning their attention to Indonesia.
With its growing industrial infrastructure, competitive labor market, and improved ease of doing business, Indonesia is positioning itself as a key destination for Chinese investment and manufacturing expansion.
Why Indonesia?
Several factors make Indonesia an ideal destination for Chinese businesses looking to diversify their operations:
1. Strategic Location
Indonesia’s geographic location along vital shipping lanes makes it an ideal hub for reaching Southeast Asia, Australia, and even African markets. For manufacturers aiming to cut transportation costs and access a broader customer base, this is a significant advantage.
2. Special Economic Zones and Industrial Parks
Indonesia has developed multiple Special Economic Zones (Kawasan Ekonomi Khusus or KEK) and industrial estates.These zones offer:
- Simplified licensing through OSS (Online Single Submission)
- Tax holidays and import duty exemptions
- Priority infrastructure and logistics support
Many of these estates have been specifically promoted to attract Chinese companies relocating due to the trade war.
3. Trade Agreements and ASEAN Access
Indonesia is a member of the Regional Comprehensive Economic Partnership (RCEP), which creates a free trade environment with China and other Asia-Pacific countries. By setting up operations in Indonesia, Chinese companies can leverage preferential tariffs to export to ASEAN and beyond.
Legal Considerations for Chinese Investors
While Indonesia is investor-friendly, it’s essential to understand the local legal framework to ensure smooth market entry and compliance. Here are key legal aspects to consider:
1. Company Establishment (PT PMA)
Chinese investors must set up a foreign direct investment company (PT PMA). This involves:
- Registering the business via OSS platform
- Obtaining a Business Identification Number (NIB)
- Drafting a notarized Deed of Establishment
- Meeting minimum capital requirements (IDR 10 billion)
2. Positive Investment List
The Indonesian government has liberalized many sectors, but foreign ownership in certain industries is still restricted. The Positive Investment List (Presidential Regulation No. 10 of 2021) defines sectors that are open, partially open, or closed to foreign investment. Legal consultation is essential before committing capital.
3. Land Use and Industrial Licensing
If your business requires physical space, navigating land acquisition laws, building permits, and environmental clearances (AMDAL) is crucial. Many KEK zones simplify this process but still require careful legal review to avoid future disputes.
4. Labor and Employment Law
Chinese manufacturers must also comply with Indonesian labor laws, including:
- Minimum wage standards
- Worker rights and termination regulations
- Registration with BPJS for health and social security
Working with local legal professionals ensures you align with both national labor standards and local customs.
Long-Term Strategic Advantage
Beyond cost savings, relocating or expanding into Indonesia offers long-term stability. The country has demonstrated macroeconomic resilience, political neutrality in global conflicts, and a consistent commitment to improving its investment climate.
Companies that act now can secure early-mover advantages, build local partnerships, and capitalize on Indonesia’s economic transformation in sectors such as:
- Electric vehicles and battery production
- Textile and apparel
- Food processing and agriculture tech
Conclusion
The trade war may have disrupted global supply chains, but it has also opened new opportunities for forward-looking companies. For Chinese manufacturers seeking a reliable, scalable, and stable production base, Indonesia is an increasingly attractive choice.
Whether you’re setting up a PT PMA, navigating Indonesia’s licensing system, or entering a special economic zone, Mylaw.id can help your needs — offering trusted legal assistance for your successful expansion into Indonesia.