Indonesia’s Energy Transition: Exercising Strategic Agency in Partnership with China
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In this paper for the Asia Society Policy Institute, Kevin Zongzhe Li examines Indonesia’s evolving energy transition strategy, through the lens of its relationship with China. He asserts that the future of Sino-Indonesian energy cooperation lies in structured, reciprocal, and domain-specific partnerships that recognize the full value of development-compatible decarbonization.
In an era of global fragmentation and weakened multilateralism, Indonesia stands at the intersection of climate urgency, development ambition, and geopolitical complexity. As Southeast Asia’s largest economy and the world’s fourth-most populous country, Indonesia must navigate the defining challenge of our time: how to decarbonize at speed and scale without derailing economic growth, industrial upgrading, and national policy autonomy.
China has emerged as a pivotal partner of Indonesia across the clean energy value chain, from nickel processing and electric vehicles to solar deployment and industrial parks, via a mixture of strategic policy design and economic gravity. Yet this engagement remains pragmatic, driven by commercial logic and resource complementarities, rather than long-term development alignment. Without deliberate structuring, Indonesia risks trading fossil fuel dependence for new forms of clean energy reliance.
Through industrial policy, downstream mandates, and targeted investment rules, Indonesia is exercising strategic agency: leveraging its market size and resource base to shape engagement on its terms. Indonesia’s evolving approach offers a reference point for other middle-power countries navigating how to engage major powers, localize value, and align external investment with domestic priorities.
This paper examines Indonesia’s evolving energy transition strategy through the lens of its deepening, but increasingly complex, relationship with China. Based on a literature review and stakeholder interviews, it offers a structured assessment of China–Indonesia cooperation across seven critical domains: electric vehicles, critical minerals, renewable energy, green finance, carbon markets, grid infrastructure, and coal transition. It deploys two diagnostic frameworks — the Strategic Partnership Priority Matrix and the Comparative Domain Partnership Assessment — to evaluate alignment and realized outcomes. A set of five guiding principles, centered on (1) enhanced reciprocity, (2) development-compatible decarbonization, (3) local value creation, (4) competitive and aligned finance, and (5) transparency and integrity, provides a normative foundation for structured and reciprocal cooperation.
