Indonesia's opportunity as Pinglu Canal reshapes supply chains

Jakarta (ANTARA) - China has just shortened its economic distance with Southeast Asia. The opening of the 134.2-km Pinglu Canal on Sept. 16 cut more than 560 km from cargo routes linking southwestern China to the sea.

For Indonesia, the change creates an opportunity while widening the choices available to companies shaping regional supply chains.

The canal connects the Xijiang River network with the Beibu Gulf and forms part of the New International Land-Sea Trade Corridor linking China with Southeast Asia.

Ships of up to 5,000 tons can now move from inland China to coastal areas along a shorter route, potentially making connections between production centers, ports, and ASEAN markets more efficient.

Indonesia is already part of the trade flowing through the area. In 2025, Indonesian bulk commodities entering China through Qinzhou reached 11.521 million tons, worth 8.26 billion yuan, or about Rp21.9 trillion. Coal, aluminum ore, rubber, and palm oil were among the commodities involved.

Better connectivity could make it easier for Indonesian commodities to reach the Chinese market while allowing Chinese products and industrial inputs to move more easily into Indonesia and other ASEAN economies. The impact, however, goes beyond freight costs.

When logistics barriers fall, companies gain more options over where to source materials, where to process goods, and where to distribute products.

A change in trade routes can therefore influence larger decisions about where production is located and how supply chains are configured.

Shifting the flow

Indonesia enters this change with an already large trade relationship with China. From January to July 2026, China accounted for 42.38 percent of Indonesia’s non-oil and gas imports and generated the country’s largest non-oil and gas trade deficit, at US$17.67 billion.

Those figures do not yet capture the impact of the Pinglu Canal, which only opened in September. They do, however, show the scale of the relationship before the new connectivity began operating.

Most Indonesian imports are also not consumer goods. Raw materials and intermediate goods accounted for 71.45 percent of imports during the period, while capital goods made up another 19.88 percent. Together, they represented 91.33 percent of total imports.

PermataBank chief economist Josua Pardede said imports of machinery, equipment, raw materials, and intermediate goods could expand production capacity if they ultimately support higher-value production and exports in Indonesia.

That is where the supply-chain question becomes more concrete. Goods arriving from China can contribute to Indonesia’s industrialization if they are connected to domestic production, local suppliers, technology transfer, and exports.

If those links remain shallow, higher trade flows could increase transactions without deepening Indonesia’s production base.

The Pinglu Canal, therefore, cannot yet be said to have changed Indonesia’s trade pattern. There is not enough data to measure its impact. What has changed is the range of routes available and, potentially, the configuration of regional supply chains.

As China and ASEAN become more closely connected, companies have more choices over where to source, process, and distribute goods.

For Indonesia, the question is not simply whether Chinese goods will move more easily into the country, but whether the new connectivity can also draw more production activity into Indonesia.

Capturing value

The opportunity comes as manufacturing accounted for 82.18 percent of Indonesia’s total exports in January-July 2026 and grew 7.16 percent year on year. Indonesia’s export base is therefore increasingly tied to domestic processing and industrial capacity.

Indonesian Trade Minister Budi Santoso has called for trade to become a driver of export-oriented investment.

He said expanding export markets could create new investment opportunities, increase production capacity, and make Indonesia more attractive as a production base connected to global supply chains.

That direction needs to translate into production-location decisions. A canal that lowers trade costs also gives companies greater flexibility in comparing production sites across the region.

Indonesia needs to ensure that its market, resources, and industrial base are strong enough to capture those decisions.

The government already has instruments aimed at doing so. Indonesia-China investment commitments under the Two Countries Twin Parks initiative have reached Rp88.1 trillion.

The government, however, has stressed that those commitments still need to be converted into concrete projects and realized investment.

Rizaldi Indra Janu, director of the Indonesia Investment Promotion Center in Beijing at the Investment and Downstream Industry Ministry, said Indonesia continues to pursue downstream processing, green energy, manufacturing, industrial estates, special economic zones, and investment facilitation.

There is also room for Chinese companies to expand cooperation in manufacturing, new energy, infrastructure, and industrial supply chains.

But bringing investment into Indonesia is not enough by itself. Capital and technology do not automatically make a supply chain local.

The impact will be greater when incoming companies are connected to Indonesia’s domestic market, local suppliers, workers, and business partners.

Without those links, Indonesia could become a production location without capturing a commensurate share of the value created by an increasingly connected supply chain.

The Pinglu Canal will not determine where that value is created. It simply makes goods easier to move and widens the range of supply-chain choices.

As China and ASEAN become more closely connected, Indonesia’s test is not how much cargo can pass through the new trade route.

The test is whether smoother trade flows can translate into more production, deeper industrial linkages, and greater value created at home.

*Martha Herlinawati Simanjuntak is a journalist at the ANTARA News Agency

Disclaimer: The views and opinions expressed here are those of the author and do not necessarily reflect the official policy or position of the ANTARA News Agency.

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