China, once primarily an agrarian society, has experienced extraordinary economic growth since initiating reforms and opening its economy in 1978. With an average annual GDP growth rate exceeding 9%, China has lifted about 800 million people out of poverty. This economic boom is attributed to large-scale infrastructural developments, rapid industrialization, and a strategic focus on export-oriented industries. China’s integration into global supply chains and its significant contribution to international trade have solidified its status as a key player in the global economy.

Indonesia, an archipelago nation with over 300 ethnic groups and the largest economy in Southeast Asia, has similarly experienced impressive economic progress since the late 1990s Asian financial crisis. Today, Indonesia has the world’s tenth-largest economy by purchasing power parity and is the fourth most populous country. According to the World Bank’s October 2023 economic report, Indonesia’s economic growth is primarily driven by improving terms of trade and a surge in private consumption. The country’s GDP is projected to grow at an average rate of 4.9% from 2024 to 2026. With aspirations to become one of the world’s largest economies by 2030, Indonesia’s manufacturing sector offers immense opportunities for both domestic and international stakeholders.

As Indonesia maps out its economic future, comparisons with China’s trajectory are inevitable. The critical question is whether Indonesia can emulate China’s success and achieve superpower status in the global economy. This exploration provides a rigorous framework for understanding the forces shaping Indonesia’s current economic landscape, its strategic priorities in infrastructure and industrial development, and the challenges it must overcome to sustain growth. By examining these factors alongside China’s historical experience, we can assess Indonesia’s potential to establish itself as a significant player on the global economic stage.

I. Economic Growth

China’s late 20th-century economic reforms, initiated by Deng Xiaoping in the late 1970s, marked a significant shift from a centrally planned to a market-oriented economy. These changes unlocked China’s economic potential, accelerating modernization, boosting exports, and attracting foreign direct investment. The introduction of a joint-venture statute in the late 1970s, followed by several other regulations (including one on patents), aimed to attract foreign investment. The early trial of “special economic zones” along the southern coast in the late 1970s paved the way for 14 cities to open up to greater levels of foreign trade by 1984. Over the ensuing decades, more regions gradually opened to international investment and trade, driving China’s remarkable and sustained economic expansion.

Conversely, Indonesia’s recent economic policies have focused on attracting investment, enhancing infrastructure, and reforming regulations to foster growth. The Indonesian government’s National Medium-Term Development Plan (RPJMN) includes significant infrastructure projects, alongside deregulation and administrative simplification efforts to improve the business climate. In 2024, Indonesia aims to grow its economy by 5.2%, driven by investment and consumption. Despite global economic challenges, Indonesia’s GDP expanded by 5.05% in 2023, slightly below the 5.31% growth of the previous year but still notable. Inflation dropped sharply to 2.61% from 5.51% the prior year, reflecting the success of the country’s monetary policies. In the first quarter of 2024, foreign direct investment (FDI) into Indonesia reached a record high of IDR 204.4 trillion ($12.59 billion), excluding investment in the banking and oil and gas sectors. This 15.5% increase from the previous year followed the February 2024 general elections, when FDI had increased by 5.3%, the smallest rise in three years. The base metals sector benefited most from FDI, followed by mining, transportation, warehousing, and telecommunications, with China, Hong Kong, and Singapore as the major contributors.

During the first quarter, Indonesia recorded IDR 401.5 trillion in total investment from both international and domestic sources, a 22.1% increase from the same period last year, creating 540,000 jobs. Indonesia’s Central Statistics Agency (BPS) reported a trade balance surplus of US$2.39 billion in June 2024, down from $2.92 billion the previous month and $3.45 billion in June 2023, marking a 30.72% annual decline. Indonesia’s economy is primarily driven by the manufacturing, agricultural, and service sectors. Manufacturing, including the automotive, electronics, and textile industries, plays a significant role in the GDP. The country is a major exporter of natural gas, crude oil, rubber, coffee, cocoa, and palm oil. Domestic consumption and investment drive the growth of the services sector, encompassing banking, tourism, and telecommunications.

II. Political Landscape 

Distinctive governance systems play a crucial role in shaping the political environment of China and Indonesia, which in turn influence their approaches to economic growth. In China, the Chinese Communist Party (CCP) exercises dominant control, characterized by long-term economic planning and centralized decision making. This one-party system has facilitated rapid policy implementation and infrastructure development, driving the nation’s economic rise. While this system efficiently allocates resources toward national objectives, it also limits civil rights and political plurality.

In contrast, Indonesia functions as a democracy, valuing decentralized decision-making, multiparty elections, and a constitution that safeguards civil freedoms. This democratic structure encourages political pluralism, allowing diverse perspectives to influence governance and policy. Democratic processes ensure greater accountability and representation but can lead to more complex decision-making and potential policy deadlocks.

China’s centralized power has historically provided the stability necessary for formulating and executing long term economic policies, attracting foreign investment, and promoting industrialization. Indonesia’s democratic governance fosters peaceful power transitions and institutional checks and balances, enhancing political stability. This stability is crucial for maintaining investor confidence, promoting sustainable economic growth, and addressing socioeconomic disparities.

Ultimately, Indonesia’s democratic system promotes political transparency and pluralism, while China’s centralized rule enables swift economic reforms and infrastructure development. Indonesia’s National Medium-Term Development Plan prioritizes infrastructure projects such as ports, highways, and energy facilities, aiming to reduce malnutrition, hunger, and food insecurity. The plan emphasizes improvements in irrigation, drinking water supply, and sanitation, and aims to enhance the productivity and sustainability of forests, fisheries, and agriculture. It also focuses on increasing innovation and investment to promote equitable economic growth and aims to reduce rural poverty. In 2024, the plan is targeting 40% of vulnerable households owning productive assets, 98% of the population having access to social security, and achieving a higher Gender Development Index score.

To increase economic resilience and competitiveness, the Indonesian government is working to reform regulations to improve the business climate, attract foreign investment, and streamline bureaucratic procedures.

China, meanwhile, has transitioned from a centrally planned to a market-oriented economy, largely due to its reform initiatives. Deng Xiaoping’s late 20th-century reforms established Special Economic Zones, liberalized trade and investment laws, and emphasized export-led growth. These reforms transformed China into a major player in international trade and a global manufacturing hub. China continues to implement reforms to boost industrial its capacity.

By comparing China’s historical and current policies with Indonesia’s ongoing reform initiatives, we gain insights into how both countries address social welfare, economic development, and governance. These comparisons highlight potential areas for cooperation and shared learning in tackling global challenges and opportunities.

The Vision Indonesia Emas 2045, or the Golden Indonesia 2045 Vision, aims for Indonesia to become a sovereign, developed, equitable, and prosperous nation by 2045, the centennial of its independence.

III. Infrastructure Development

President Joko Widodo has set forth an ambitious infrastructure strategy to transforming the country’s connectivity and economic landscape. A key project in this strategy is the Jakarta-Bandung High-Speed Rail, a joint venture between Chinese and Indonesian companies. Once completed, this rail line will reduce travel time between the capital and Bandung to just 40 minutes, enhancing transportation efficiency and symbolizing Indonesia’s strategic infrastructure development relationship with China. Another landmark endeavor is the proposed relocation of the capital city from Jakarta to East Kalimantan. This will address Jakarta’s severe traffic congestion and environmental issues, and create a smart, sustainable metropolis for approximately 1.5 million people using green technologies and urban planning principles.

In contrast, China’s Belt and Road Initiative (BRI) spans continents, focusing on improving connectivity and trade through substantial infrastructure investments. By providing loans, investments, and construction projects, the BRI aims to develop infrastructure in participating countries, creating new trade routes and economic corridors. The Jakarta-Bandung High-Speed Rail exemplifies a similar approach to promoting economic growth through strategic infrastructure investments. According to Li Hongchang, the successful construction of this railway will serve as a model for other countries along the Belt and Road, accelerating the global adoption of China’s high-speed rail technology.

Enhancing transportation infrastructure—including roads, seaports, airports, water, electricity and power is important. The Indonesian government estimates it can only contribute about 35% of the total investment needed, thus seeking local and foreign funding through Public-Private Partnerships (PPPs) as alternative development financing sources. Additionally, Indonesia leverages concessional loans and Special Economic Zones (SEZs) to attract investment and advance regional development. SEZs provide businesses with reduced regulatory frameworks and advantageous tax benefits, while concessional loans offer affordable financing options for infrastructure projects, promoting economic growth in targeted areas.

Chinese investment has increased Indonesia’s infrastructure development. Chinese companies have participated in the construction of new seaports and airports across the archipelago, often financed by loans from Chinese banks. These investments are part of broader economic cooperation agreements between China and Indonesia. Chinese investment is introducing advanced technology and engineering expertise, enhancing project efficiency and quality. However, these investments raise concerns about debt sustainability and potential economic dependency on China. To mitigate these risks and ensure balanced development, Indonesia has sought to diversify its funding sources by partnering with other international players like Japan and multilateral development institutions such as the Asian Development Bank (ADB) and the World Bank.

IV. International Relations

Indonesia participates in the Association of Southeast Asian Nations (ASEAN) Free Trade Area, which spans the entire South East Asian region. Preferential trade agreements with Australia, China, Hong Kong, India, Japan, Korea, and New Zealand are also held by ASEAN, and consequently, Indonesia. In November 2019, text-based negotiations for the Regional Comprehensive Economic Partnership were completed. Other than Chile, Indonesia has signed FTAs with Australia, Chile, Mozambique, Iceland, Liechtenstein, Norway, and Switzerland. South Korea and Indonesia recently finished their Comprehensive Economic Partnership Agreement discussions. Along with revisiting its trade agreements with Pakistan and Japan, Indonesia is now negotiating free trade agreements (FTAs) with the European Union (EU), India, Tunisia, and Turkey.

Indonesia is also positioned as a key node in China’s wider trade network due to its strategic location inside the maritime Silk Road component of the Belt and Road Initiative (BRI). This facilitates Chinese investments in Indonesian infrastructure and fosters stronger economic ties. Though both China and Indonesia place a strong emphasis on trade expansion and infrastructure development, their strategies are different. Indonesia prioritizes integration into ASEAN and other regional frameworks, but it also employs bilateral agreements to expand the range of commercial relationships it has. China’s Belt and Road Initiative (BRI), in contrast, is a worldwide initiative that promotes trade and infrastructure investments by means of massive interconnection projects that span many continents.

Indonesia was given the task of chairing ASEAN for the fifth time in 2023, following Cambodia. The nation has accomplished more than just chairing ASEAN. Not only is Indonesia establishing agreements in the areas of politics, economy, society, and culture, it is also helping with a number of peace initiatives. The situation in Myanmar is one of the major topics Indonesia is involved with. In an effort to assist Myanmar in resolving its political crisis, the ASEAN member nations, including Indonesia, launched the Five-Point Consensus during the 42nd ASEAN Summit in Labuan Bajo. Indonesia was selected to serve as the conflict’s mediator in the Philippines. The reason for this is Indonesia’s impartial stance and the presumption that Indonesia is aware of the conflict involving the Moro National Liberation Front (MNLF) and the Philippines. Additionally, Indonesia was crucial in bringing an end to the Vietnam-Cambodia conflict (1988– 1989). As a result of Indonesia’s efforts, Vietnam decided to remove its troops from Cambodia. Indonesia keeps pushing for increased marine security cooperation in the maritime domain, particularly when it comes to addressing the problem of illegal, unreported, and unregulated fishing. This has been accomplished by putting into practice the 2015 East Asia Summit (EAS) Statement on Strengthening Regional Maritime Cooperation.

By contrast, China’s expanding trade and infrastructure links throughout the Asia-Pacific region have changed the dynamics of the region and sparked concerns about its geopolitical goals. China and Indonesia have similar goals in regional stability and economic growth, despite their differing geopolitical approaches. In order to preserve its sovereignty and regional interests within ASEAN frameworks, Indonesia aims to strike a balance in its relations with major countries such as China, the US, and Japan. It does this by utilizing economic cooperation.

Strategic alliances with key international powers like China, the US, and Japan, each of which has a unique impact on the political and economic stability of the nation, characterize Indonesia’s foreign policy. In 1950, China and Indonesia established official diplomatic ties, which are more often known as Sino-Indonesian relations. Before this, the two nations had a variety of contacts for many centuries, centered mostly on informal trading. China is now the second-largest foreign aid donor to Indonesia. China has also funded and developed a number of infrastructure projects in the nation to spur further economic growth, notably in the utility, transportation, industry, and tourism sectors. For security support and geopolitical alignment, Indonesia cherishes its alliance with the US, particularly when addressing regional issues like maritime security and counterterrorism initiatives. Japan, on the other hand, has a long history of supporting Indonesia’s growth and is well-known for its investments in infrastructure and technology. Japan’s industrial strengths and economic diversification are enhanced by the substantial contributions. Japan and Indonesia share a strategic alignment that strengthens bilateral relations by promoting collaboration on disaster response and regional stability.

V. Challenges and Obstacles

Recently, economic disparities have emerged as a prominent topic in the presidential campaign. Unfortunately, none of the three candidates have presented a comprehensive plan to address this complex issue. The World Bank report highlights four critical structural challenges for Indonesia: limited labor force mobility, which hampers the alignment of workers with optimal job locations; slower progress in reducing regional income disparities; weakened wage growth and rising inequality since the COVID-19 pandemic; and increasing concentration in the manufacturing sector. Urban areas, particularly Jakarta and other major cities, enjoy better access to services and higher income levels compared to distant, rural and isolated regions, where poverty rates remain disproportionately high. These regional disparities increase economic inequality, with eastern Indonesia lagging behind from the more developed western provinces in basic provisions like infrastructure, healthcare, and education. Such differences obstruct equitable economic progress across the archipelago and contribute to social isolation. In contrast, China has implemented targeted policies to combat economic inequality, such as urban-rural integration plans, poverty alleviation programs, and regional development initiatives.

Indonesia faces significant environmental issues that threaten its rich biodiversity and contribute to global environmental problems. The country’s rapid industrialization and economic growth have increased deforestation, habitat loss, and environmental degradation. Indonesia’s palm oil industry, responsible for 59% of global palm oil production, has led to increased carbon emissions and biodiversity loss due to deforestation for mining, agriculture, and palm oil plantations. As one of the top greenhouse gas emitters worldwide, Indonesia’s urbanization has strained water supplies and heightened pollution levels, adversely affecting the environment and public health. Coastal areas are threatened by pollution, overfishing, and rising sea levels.

Indonesia has taken steps to address these environmental challenges, such as implementing a moratorium on new palm oil plantations from 2018 to 2021, which resulted in a 75% reduction in deforestation between 2019 and 2020. However, more aggressive and comprehensive strategies are needed to tackle the extent of environmental degradation and climate change effects. Government policies will be crucial in meeting the 2060 net-zero emissions target.

Internal and external factors threaten Indonesia’s political and social stability, impacting social cohesion and governance. Ethnic and religious tensions pose risks to political stability, while socioeconomic inequities compounded by geographic and urban-rural disparities—fuel social unrest and political discontent. Corruption and misuse of authority remain prevalent, though Indonesia stands out for holding a comparatively high number of officeholders accountable for criminal conduct.

Despite these challenges, Indonesia’s Anti-Corruption Commission has made notable strides in arresting and convicting high-ranking officials, lawmakers, ministers, governors, and judges. Recent years have seen limited conflicts among Indonesia’s democratic institutions, with the political system stabilized by consensus democracy and cooperation between the legislative and executive branches. However, this has led to reduced horizontal accountability. Structural issues persist across multiple ministries, resulting in conflicting rules and policies due to inadequate coordination.

Although democratic consolidation has advanced since Suharto’s authoritarian regime ended in 1998, issues related to the rule of law, accountability, and transparency persist. Reforms aimed at strengthening democratic institutions, enhancing transparency in public administration, and fostering inclusive political engagement are underway.

VI. End Note

We have explored Indonesia’s evolving political, social, and economic landscape. The country’s burgeoning digital economy and significant infrastructure projects underscore its potential as a regional economic powerhouse. Politically, Indonesia grapples with socioeconomic inequality and governance challenges, reflecting the complexities of its diverse democracy. Amid rapid growth, Indonesia faces social challenges related to environmental sustainability and inequality. The relationship between China and Indonesia has flourished, highlighting the benefits of their collaboration, with both nations sharing similar economic aspirations and leveraging each other’s strengths. However, while China’s centralized strategy and rapid industrialization set it on a distinct path, Indonesia’s democratic framework and socio-economic diversity present both opportunities and challenges. The nation’s future prosperity will hinge on its ability to address key issues while capitalizing on its strategic location, natural resources, and demographic advantages. Sustained economic growth, driven by infrastructure investments and technological advancements, will be crucial, supported by regulatory reforms to enhance transparency and institutional capability. Sustainable development initiatives and international partnerships will play vital roles in navigating global uncertainties and ensuring equitable growth across Indonesia’s regions. According to the McKinsey Institute, Indonesia could become the world’s seventh-largest economy by 2030, with over 135 million middle-class consumers driving demand for global goods and services. As its democracy matures and stabilizes, Indonesia stands poised to leverage its advantages in Southeast Asia—a dynamic region of 600 million people and robust economic growth. In essence, Indonesia has the essential elements to achieve remarkable success.