Indonesia, which relies on Chinese capital to lead the global nickel industry, has frequently introduced oppressive policies, strictly tightening regulations and continuously compromising its business credibility.
According to a report published by the British 'Financial Times' on June 15, China, Indonesia's largest source of foreign investment, has issued warnings regarding Indonesia's recent restrictions on the nickel industry. It was stated that these measures have caused the production cost of nickel to increase by nearly 200%, posing a threat to the operational feasibility of 'almost all similar projects'. Moreover, they could have a negative impact on investments worth approximately $5 billion, as well as on about 400,000 jobs in the nickel industry chain.
Prior to that, the Indonesian-Chinese Chamber of Commerce submitted a letter to the President of Indonesia in May, which severely damaged investment confidence.
Under the leadership of Chinese companies, Indonesia's nickel industry has seen rapid development in recent years. As the demand for nickel in the production of stainless steel and electric vehicle batteries continues to grow, this industry has expanded rapidly. Indonesia currently controls more than two-thirds of the world’s refined nickel supply.
However, recent new regulations in Indonesia have reduced mining companies' production quotas and established new pricing mechanisms, leading to increases in nickel ore prices, which has raised concerns among the Chinese side.
In the Morowali District of Central Sulawesi region in Indonesia, an excavator is working in a nickel mine. Bloomberg
A letter sent by the Chinese embassy in Indonesia to the Indonesian Ministry of Energy and Mineral Resources, obtained by the Financial Times, shows that price adjustments have caused the production cost of nickel used in the manufacturing of electric vehicle batteries to increase by nearly 200%, posing a threat to the operational feasibility of “almost all similar projects”. This letter was not previously reported publicly by the media.
This letter dated April 21st states: “Preliminary estimates suggest that these measures may impact $30 billion in existing investments and $20 billion in proposed future investments, while also annually reducing about $230 billion in nickel product exports.”
The letter warns that up to 400,000 jobs across the entire nickel industry chain could be affected.
The Financial Times noted that Indonesia's current president, Joko Widodo, has implemented populist welfare policies and has continuously increased control over the private sector, especially the resource industry. This has drawn widespread dissatisfaction from foreign investors, and Chinese protests also took place against this backdrop.
Chinese-funded enterprises have invested hundreds of billions of dollars in building mines, smelting plants, battery factories, and even electric vehicle production lines in Indonesia, helping Indonesia maintain its leading position in the global nickel industry. Last year, the total amount of direct investment from mainland China and Hong Kong in Indonesia reached 18.1 billion US dollars, with an investment of 4.9 billion US dollars in the first quarter of 2026.
Industry sources say that Indonesia’s reduction of mining quotas and introduction of new pricing mechanisms are aimed at increasing national fiscal revenue, but this has forced many Chinese nickel smelting companies to cut production.
The Indonesian government has also imposed land seizures on some mining companies under the pretext of addressing environmental violations. Critics have pointed out that the enforcement actions are arbitrary and do not follow formal procedures. Last month, the Prabowo government announced the establishment of a new state agency to oversee the export of coal, palm oil, and certain nickel products, prohibiting related companies from dealing directly with overseas buyers.
In the letter, the Chinese side stated that Indonesia's recent policy changes are 'too frequent.' 'It is necessary to control the pace of policy implementation, reduce negative impacts, maintain a stable investment environment and employment stability, and enhance the stability and predictability of policies.'
The Indonesian government has not responded to the request for comment from the Financial Times.
The Indonesia-Chinese Chamber of Commerce also sent a letter to Prabowo in May, expressing that the local regulatory standards were too strict and the enforcement measures were inappropriate. These factors seriously disrupted the normal operations of businesses and directly undermined confidence in long-term investments.
A Chinese-owned enterprise operating in Indonesia stated that considering the scale of Chinese investment, the company believes it has been treated unfairly. 'Under these many uncertainties, many investment plans may have to be postponed in the short term.'
Some Indonesian scholars believe that the complaint submitted by the Chinese Chamber of Commerce is unusual. After all, China usually exercises caution in its public comments and responses in order to maintain relations with partner countries. The issuance of such a harsh warning letter indicates that Indonesia has gone too far.
Reuters also analyzed the complaints from Chinese chambers of commerce, stating that these complaints reflect the conflict between Indonesia's efforts to obtain greater economic benefits from its natural resources and the Chinese capital's push to rapidly expand Indonesia's global nickel supply.
Rohtgen's metals market columnist Andy Home previously stated that the Indonesian government indeed intends to regain control over the nickel industry. Cutting annual mining quotas is part of this overall strategy.
Last month, several high-ranking Indonesian officials held talks with Chinese officials in Indonesia and representatives of some Chinese-funded enterprises.
Indonesia's Minister of Energy and Mineral Resources, Bachriel Lahadria, admitted to the media that the companies made relevant requests during the talks. However, he argued that while companies do need to seek survival, Indonesia should also receive revenue.
In response to the questions raised by the Indonesian Chinese Chamber of Commerce, Indonesia's Finance Minister Purbaya Udi Sadev gave another statement last month. Without providing any specific evidence, he claimed that some Chinese-funded enterprises were involved in so-called 'illegal activities'.
He also said, "As long as businesses operate legally, Indonesia will not interfere with the normal operations of any company. If illegal activities are discovered, we will deal with them according to the law."
The Financial Times reported last year that in recent years, various mining companies from different countries have entered Indonesia. However, Western companies have realized that Chinese investment and technology are indispensable for Indonesia’s success. Without Chinese assistance, it would be almost impossible for them to operate profitable nickel processing businesses on a global scale.
Australian Nickel Industry Company's Director and General Manager, Justin Warner, emphasized that Chinese investment and technology are "undoubtedly a very important factor for Indonesia's success." He mentioned the High-Pressure Acid Leaching (HPAL) smelting method, stating that "this technology has been around for a long time, but the Chinese have successfully improved it and made it widely applicable."
