More Chinese companies looking to manufacture in Indonesia: OCBC

[JAKARTA] Chinese companies are increasingly looking to set up their manufacturing operations in Indonesia, instead of just exporting and distributing their products in the South-east Asian nation.

While Indonesia has remained attractive for its stable domestic economy, local policy shifts and the need to diversify supply chains are driving Chinese investments into the country, said Martin Widjaja, wholesale banking director at OCBC Indonesia.

Widjaja was speaking on the sidelines of the bank’s One Connect Forum held in Jakarta from Aug 26 to 27. The forum – currently in its third iteration – is where the bank brings its Chinese customers to Indonesia to meet potential partners and discuss expansion plans.

“Three years ago, it was simply a business matchmaking forum where China’s producers would find a local buyer or a local distributor. In the third year, the mood has shifted to such that they want to set up a local operation here,” Widjaja said.

He noted that this is in part due to policy shifts.

As part of its development plans for 2025 to 2029, Indonesia is targeting 8 per cent economic growth, where investments – both foreign and domestic – would be a key contributor.

To achieve these targets, it highlighted several strategic priorities, which include a focus on new renewable energy, semiconductor, digital economy and healthcare sectors, as well as downstreaming and export-oriented manufacturing industries.

For 2024, the country recorded a total investment realisation value of 1,714.2 trillion rupiah (S$133.2 billion), up 20.8 per cent year on year.

In particular, Chinese investments accounted for 121.6 trillion rupiah in 2024, making it the third-largest foreign direct investor in Indonesia, behind Singapore and Hong Kong.

China contributed about 14 per cent of Indonesia’s foreign investments in 2024.

First-mover advantage

Given Indonesia’s fast-growing domestic market, Widjaja also noted that these Chinese companies wish to have a first-mover advantage.

“I don’t think the mode is dumping,” Widjaja said. “The mode is to have a presence here, be close to the customer, and be the first one in the market when it grows, because the population is expected to grow to almost 300 million in the next five years.”

One Chinese company that has set up in Indonesia is medical device manufacturer Wego, which entered into a joint venture with Indonesian medical device maker Oneject in 2025.

Vivienne Zhang, general manager of South-east Asia at Wego Overseas Group, said that the company is not foreign to doing business internationally, particularly in Indonesia, but a change in the local policy drove it to accelerate its foreign manufacturing processes.

“In 2017, the local government said it will procure based on preference of local-made (products)… Two years ago, suddenly everything stopped – that reminded us that we have to do foreign manufacturing,” Zhang added.

For Wego, Indonesia is “just the right market” for it to start building its global manufacturing capacity and its team, given its high population density, large domestic market and less competition compared to other markets in the region. “Currently, the two countries also have a very stable and sweet relationship,” Zhang noted.

She pointed out that the company is still a “stranger” in the Indonesian market when it comes to manufacturing; hence it is counting on partners, such as Oneject, for local insights and building trust.

Meanwhile, Indonesia has also somewhat benefited from its tariff negotiations with the US.

OCBC’s Widjaja noted that Indonesia’s final tariffs at 19 per cent makes it an attractive export hub compared to the other parts of the region. “(The Chinese) are here to make Indonesia a production base, take advantage of the tax incentive and labour, for (their products) to be exported to other parts of the world,” he said.

Competitive advantage

Currently, domestic business is still OCBC’s largest income contributor in Indonesia. But Widjaja expects bigger contributions from its China business going forward with the influx of Chinese investment.

The bank’s China business team – a unit set up three years ago to target Chinese corporates expanding into Indonesia – has grown its customer base by 50 per cent year on year.

These customers typically look for basic banking products, with general account services and foreign exchange contributing to the majority of their transaction requirements, he noted.

Chinese customers used to prefer expanding overseas by setting up a base in Singapore, before looking for a different market to go to, said Roy Tan, head of enterprise banking international at OCBC.

Given that the Chinese community in Indonesia has grown in recent years, Chinese customers are significantly less reluctant to enter the market directly, added Tan, whose team specialises in handling corporates that are interested in expanding overseas.

In Indonesia, OCBC is represented in the majority of the areas that companies want to do business in, Widjaja said. This gives it an edge over Chinese banks, which have a smaller presence in the South-east Asian nation.

Meanwhile, OCBC’s network in Asia – with its key hubs in Singapore, Hong Kong and Malaysia – also gives it an edge over local Indonesian banks, he added.

“There are still a lot of uncertainties, political-wise and economic-wise,” said Parwati Surjaudaja, president director and chief executive of OCBC Indonesia. “But we see that there are usually opportunities that come out of a crisis.”