The rise of the People’s Republic of China in the last three decades has been nothing short of a miracle. China has gone from struggling to feed its people to being a great power with ever increasing global ambitions. From the remotest corners of Africa to South America, China has emerged as a major political and economic actor. However, as one would expect, the Chinese presence is felt with even greater intensity in its own neighborhood. In Southeast Asia, China is an important if not the most important economic actor, being a key trading partner with all 11 countries in the region.

China

China’s economic power has enabled Beijing to build and expand its diplomatic and political influence in Southeast Asia. This new economic and political power is being steadily complemented by the rapid modernization of the Chinese military, especially the People’s Liberation Army Navy.

A powerful China poses both challenges and opportunities for Southeast Asia and for Indonesia in particular. Indonesia is of significant political, diplomatic, strategic and economic interest to both China and the reigning superpower, the United States. The world’s largest archipelagic nation, Indonesia sits astride vital sea lines of communication between three continents. A huge portion of the world’s trade passes through Indonesian waters or very close to its territory.

While a secular state, Indonesia has the world’s largest Muslim population, and is a vibrant young democracy that is rich in natural resources. As such, one can only expect China, the US and regional powers such as Australia, Japan and India to increase their presence in the country. Managing this great-power interest is likely to become Jakarta’s main diplomatic and political challenge in the coming years. Indonesia is already being actively courted by China and the US, and American ally Australia, with major interests in the region, is pursuing an even more extensive courting offensive.

China’s links to Indonesia date back to the 14th century, when Chinese traders reached the archipelago in search of precious commodities such as spices and timber. Through the centuries, thousands of Chinese settled in Indonesia, and today they constitute around 4 percent of the population. In 1967, Indonesia severed diplomatic relations with China after President Soeharto consolidated power. Soeharto’s new military-backed regime suspected that China had been supporting the Indonesian Communist Party (PKI), including the abortive coup in 1965, allegedly backed by the PKI, which was crushed by Soeharto and his allies. Jakarta didn’t re-establish ties with Beijing until 1990, making Indonesia the last country in the region to do so. Since then, however, bilateral ties have blossomed. Cooperation has increased significantly, with the two countries signing dozens of agreements on issues ranging from agriculture to defense and security. Senior officials from both countries regularly make visits, including President Susilo Bambang Yudhoyono visiting China in March 2012. During that visit, the sides signed various agreements worth $17 billion.

Trade between the nations has grown rapidly since the restoration of diplomatic ties. In 1990, Sino-Indonesian trade was a mere $1.5 billion but reached $49 billion in 2011, while Indonesia’s trade with the US was only $29 billion that year. Today, China is Indonesia’s second-largest trading partner after Japan, importing vast quantities of thermal coal, palm oil, timber, pepper and other primary commodities. PetroChina and the China National Overseas Oil Company have established a strong presence in Indonesia, while several major manufacturing companies have set up plants in the country. China has also provided hundreds of millions of dollars in soft loans to Indonesia.

Perhaps more significant, considering the history of tensions between the two countries, is the growing cooperation in defense and security-related areas. In recent years, Jakarta and Beijing have signed several agreements relating to defense cooperation, and a growing number of Indonesian defense and security officials have gone to China to study. In early January, the countries set up a naval dialogue mechanism. The most important development is perhaps growing cooperation in military technology research. In early 2012, the countries signed an agreement on transferring Chinese missile technology to Indonesia. Under the agreement, China will assist Indonesia in the production of C-705 anti-ship cruise missiles. The C-705, a variation of the land attack C-704 missile, has a reported range of 135 kilometers and a good degree of accuracy.

Given that it is an archipelago, anti-ship missile technology is important to improving Indonesia’s naval capabilities. And the fact that China is willing to transfer such sensitive technology to Indonesia shows Beijing is determined to build goodwill with Jakarta. Indonesia has long sought to develop its own defense industries, with limited success. A major obstacle for developing countries to build their own indigenous military industries is reluctance by Western powers to share technology. In many instances, Chinese weapons sales and technology transfers are not motivated by profit but rather by political and diplomatic considerations. By selling sensitive technologies, China hopes to gain political points that translate into economic and diplomatic benefits, such as sympathy for Beijing’s positions in international forums.

This strategy has also been carried out in Latin America and elsewhere. China has assisted Brazil with its satellite and missile programs, while selling sophisticated electronic warfare equipment to Venezuela at friendly prices. A brief survey of Sino-Indonesian relations clearly shows that the two countries have come a long way since 1965. Many point to Beijing’s interest in Indonesia’s vast natural resources and markets. These are no doubt of great interest but strategic and political considerations are emerging as equally important. Indonesia has a growing international reputation and is a major influence within ASEAN. The fact that Indonesia lies astride several strategic maritime chokepoints is of major interest to China, especially as the Chinese Navy continues to expand. A China with power projection capabilities would want its interests in the region taken into account.

While China has made substantial inroads into Indonesia, Beijing’s ability to influence policy in Jakarta remains uncertain. Indonesia is willing to expand economic and trade relations and cooperate in military affairs, but one should not interpret that as a sign of a close political relationship. Jakarta is well aware of Beijing’s appetite for raw materials and the benefits it can bring to the Indonesian economy. In a time of economic crisis in the West, China has been a major source of trade and investment. As such, Indonesia will continue to engage China in a strictly pragmatic manner. China seems to be aware of this and does not seem to mind. On several occasions, Chinese and Indonesian authorities have stressed “the pragmatic nature of their relations.” When referring to its ties with Africa, Beijing always stresses equality and mutual respect. When it comes to Indonesia, however, the word pragmatism is often used.

During former Brazilian President Lula Da Silva’s first term in office, official statements on Sino-Brazilian ties were replete with slogans about South-South cooperation, an alliance of third world giants, a strategic partnership and so forth. No such pretenses are even attempted in Sino-Indonesian relations. Indonesia is likely to follow its traditional policy of nonalignment, while having close ties with certain Western powers, chiefly the US and Australia, and maintaining close relations with regional powers including Japan and South Korea, who also happen to be close American allies. But since the mid-1960s, Indonesia has maintained a policy of avoiding overt alliances.

Throughout its history as an independent nation, Indonesia has coveted an international role, hosting the Bandung Conference in 1955 and playing an important part in the Nonaligned Movement, even as the Soeharto regime remained close to the West. Indonesia’s continued engagement with Iran and North Korea, and public comments on their disputes with the US and international community, shows that Jakarta still aspires to a major role in international affairs. Indonesia’s engagement with China needs to be seen in this historical context. Jakarta will continue to seek close ties with Beijing while also consolidating its relationships with its traditional partners. That does not mean an alliance, however. Expectations of Indonesia “aligning” with the US and Australia may be misplaced. With

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