China is perhaps the most important economic partner for Indonesia, being both the second-largest investor in the country and the leading market for exported goods. Beyond economic ties, however, the relationship with Beijing is relatively weak and Jakarta often sees China as a strategic challenge. This paper looks at some of the challenges that China might pose to Indonesia in the longer term.

Key points:

• The area that China claims in the South China Sea crosses into the northern reaches of Indonesia’s Exclusive Economic Zone. Exploitation of that area by China could damage Indonesia’s economy.
• Indonesia needs to bolster its naval force if it is to ensure the security of its waters in the event of a maritime conflict.
• Indonesia has been cautious in accepting Chinese investment, but there are still concerns that those economic ties could lead to Indonesia handing over political power.
• Maintaining the relationship with China will be especially important to preserve dialogue and avoid escalations in the South China Sea.
• Bilateral ties with China could be threatened by political divisions and ethnic tensions in Indonesia, as well as Beijing’s treatment of Uighur Muslims.