Tariffs push manufacturers to relocate
Indonesia is attracting a surge of Chinese manufacturers seeking to sidestep U.S. import tariffs that exceed 30% on goods from China. The country’s 19% tariff rate—matching Malaysia, the Philippines, and Thailand—offers an appealing alternative, especially given Indonesia’s vast domestic consumer base. Gao Xiaoyu, founder of PT Yard Zeal Indonesia, says inquiries and site visits have surged since a recent U.S.-Indonesia trade deal, with industrial parks operating at full capacity. Chinese demand has already pushed industrial land and warehouse prices up by 15% to 25% year-on-year, the fastest rise in two decades.
Economic growth and investment inflows
Indonesia’s economy grew 5.12% in the second quarter, its fastest pace in two years, supported by rising foreign direct investment. In the first half of 2025, Chinese and Hong Kong investments increased 6.5% year-on-year to $8.2 billion, contributing to a total FDI inflow of $26.56 billion. President Prabowo Subianto has strengthened ties with Beijing, hosting top Chinese leaders in Jakarta and securing commitments for further trade and investment. Industry analysts say Indonesia’s large talent pool and young demographic make it easier for foreign firms to scale rapidly in the country.
Demand for industrial space surges
West Java, home to the Patimban deep sea port, has become a hotspot for incoming Chinese manufacturers, from toy and textile makers to electric vehicle producers. Colliers International reports daily inquiries for industrial land, with many companies seeking temporary facilities to start production immediately. Some manufacturers, like motorcycle parts producer Zhang Chao, cite Indonesia’s 20–30% net profit margins—compared to as low as 3% in China—as a major incentive for relocation.
Long-term appeal of domestic market
Beyond trade diversification, Indonesia’s growing consumer market—household spending accounts for more than half of GDP—remains a major draw. Consumption rose 4.97% in the second quarter, supported by public holidays and rising incomes. Investment consultants highlight that Indonesia’s combination of tariff advantages, infrastructure capacity, and domestic demand offers a strategic base for companies targeting both local sales and wider Southeast Asian markets.