Indonesia's Active Diplomacy Hollowed Out by China Dependence — SkimNews
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- Prabowo Subianto has visited nearly 30 countries since taking office in late 2024, steered Indonesia into BRICS, and positioned himself as a mediator in conflicts from Ukraine to Gaza to Iran — a pace rivaling his predecessor's decade in office
- Indonesia's 2025 budget deficit hit 2.9% of GDP and is projected to hold at that rate in 2026, the country's widest non-pandemic shortfall in two decades, while the rupiah plunged to historic lows among emerging market currencies
- China has been Indonesia's largest trading partner since 2013, with two-way trade surpassing US$160 billion in 2025 — more than 30% of Indonesia's total foreign trade — and the China-Hong Kong bloc now rivals Singapore as Jakarta's top source of foreign capital under the Belt and Road Initiative
- The China Chamber of Commerce in Indonesia (CCCI) sent a rare blunt protest letter directly to Prabowo in May 2026, warning that mining quota cuts, proposed royalty hikes, and aggressive enforcement threatened stalled projects and capital flight
- Confronted by that pushback, Jakarta quietly postponed planned mineral royalty hikes and created an investment acceleration task force under Presidential Decree No. 4/2026 to bypass bureaucracy and expedite licensing for Chinese investors
- Indonesia's textile and garment sectors collapsed under cheap Chinese imports — the Sritex bankruptcy and dozens of factory closures displaced hundreds of thousands of workers — yet Jakarta repeatedly hesitated on safeguard tariffs fearing retaliation
- Chinese Foreign Minister Wang Yi visited Jakarta in August 2026 calling for a 'safe, stable, and favourable business environment,' while Indonesia stays largely silent on environmental damage and labor abuses at Chinese-dominated nickel hubs in Central Sulawesi and North Maluku
Why it matters: A 2.9% GDP deficit and a record-weak rupiah have stripped Jakarta of fiscal cushion to resist Chinese economic leverage, forcing retreats even on its strongest hand: nickel downstreaming policy. The May 2026 CCCI protest letter — followed by postponed royalty hikes — demonstrates that Beijing can extract concessions on Jakarta's so-called trump card, meaning Indonesia's bebasaktif doctrine is increasingly performative rather than operational.
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