Complementarity and Contention: Chinese FDI and Chinese firms in Indonesia

Abstract

Available data on the flows and stocks of Chinese FDI in Indonesia suggest that they have increased significantly during 2004-2017. Further analysis indicates that these data give an incomplete impression of the activities of Chinese firms in Indonesia. The paper substantiates this by analysing other quantitative data, as well as individual investment cases. It discusses four specific characteristics of Chinese investment in Indonesia: (a) activities of Chinese companies in Indonesia are only partially reflected in the available investment data; (b) Chinese investment is concentrated in mining and project construction and management, rather than manufacturing industry, unlike foreign direct investment from other countries; (c) Chinese firms received concessions in terms of expatriate employment and locally-sourced supplies that reduce the backward linkages of their investment; (d) several Chinese investment projects were based on over-optimistic assessments of their commercial viability, which will require Chinese investors to reflect on their strategic objectives. Show more