Indonesia's Resource Power Play: How Jakarta Is Reshaping Global Commodity Markets — and Squeezing China

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A Bombshell Announcement in Jakarta

On May 21, 2026, Indonesian President Prabowo Subianto stood before parliament and delivered what many analysts are calling one of the most consequential economic announcements in the country's modern history. Starting this September, a newly created state-owned company — Danantara Sumberdaya Indonesia — will take over all foreign sales of Indonesia's three most important export commodities: thermal coal, crude palm oil, and nickel products.

The new entity was formally registered just one day before Prabowo's speech. It is 99 percent owned by Danantara, the sovereign wealth fund Prabowo launched in early 2025. Private companies, including dozens of major Chinese-backed firms, will be required to hand over their export operations to this entity in a transition period running from June through August.

"The designated state-owned enterprise will act as a marketing facility," Prabowo said. "We want to tackle under-invoicing." His message to foreign buyers who resist Indonesia's pricing power was blunt: "If they don't support our price, then they don't have to buy it."

Why Now — and What's at Stake

Indonesia is not acting from a position of comfort. The Indonesian rupiah has plummeted to record lows in recent weeks, briefly hitting 17,743 per US dollar. Government reserves have been drained in part by energy cost shocks stemming from the ongoing conflict in the Middle East. Prabowo's government says it has lost as much as $908 billion over the years due to systematic under-reporting of export values — a practice known as under-invoicing — that allowed businesses to avoid taxes and state fees.

The new policy is designed to fix that by putting the government directly in charge of pricing and sales. Starting June 1, all natural resource exporters must also store 100 percent of their foreign earnings in Indonesian state-owned banks — a measure aimed at stabilizing the currency by keeping more dollars inside the country.

Indonesia's leverage here is enormous. The country is the world's largest exporter of thermal coal (the type burned in power plants) and crude palm oil (used in food, cosmetics, and biofuels). It also holds the world's largest known nickel reserves, a mineral that is essential for electric vehicle batteries and stainless steel production.

China in the Crosshairs

The country most exposed to this shift is China. In 2025, Indonesia exported over $67 billion worth of goods to China — its largest trading partner by far. Iron and steel products, mineral fuels, nickel, and palm oil together made up the bulk of those exports. Chinese firms also dominate Indonesia's domestic nickel processing industry, which has been built up over the past decade with enormous Chinese investment.

Even before Prabowo's formal announcement, Chinese business groups had grown alarmed. The China Chamber of Commerce in Indonesia sent a five-page protest letter last week warning of "excessively stringent regulation, over-enforcement, and even corruption and extortion" targeting Chinese enterprises. It called the business environment "severely disrupted" and warned of eroding long-term investment confidence.

Prabowo's response was, effectively, to ignore the complaint — and proceed anyway.

"Indonesia has become vital to China," said Li Shuo of the Asia Society Policy Institute's China Climate Hub, because Indonesian commodities underpin China's dominance in electric vehicles, batteries, and industrial manufacturing. That dependency is now a point of leverage for Jakarta.

Market Shockwaves

Financial markets reacted immediately and negatively. Jakarta's main stock index fell 3.5 percent on Tuesday, the day rumors of the plan first surfaced, and dropped another 2 percent on Wednesday before recovering somewhat. Commodity stocks led the losses. Prices for thermal coal and nickel showed volatility on global markets as traders reassessed supply commitments.

The rapid timeline is raising serious doubts among analysts. Taking full control of three major export sectors in under four months is a logistical challenge of enormous scale. Indonesia's palm oil industry alone involves hundreds of private exporters with long-established contracts around the world.

"Exporters usually already have their own established markets," said Eddy Martono, chairman of the Indonesian Palm Oil Association. "We must ensure we do not lose these markets if they are not managed properly."

As of now, private businesses say they are still waiting for concrete guidance. The coordinating economic minister, Airlangga Hartarto, promised that investors would be briefed before June 1, describing the initial phase as focused on "transparency in reporting."

An Opening for the United States?

While China feels the squeeze, analysts suggest the United States and other Western investors may find a door opening. By reducing Chinese dominance over its resource industries, Indonesia is effectively inviting competition for its raw materials.

"Such a move is a clear signal that U.S. investment is being attracted to come to Indonesia even more," said Bhima Yudhistira of the Jakarta-based Center of Economic and Law Studies. He described the new policy as a "hostile takeover" of Chinese-controlled contracts, predicting that every major deal in Chinese-dominated sectors will be subject to renegotiation.

The geopolitical timing is notable. The US-China rivalry over critical minerals — especially those needed for clean energy and defense technology — has intensified sharply in recent years. Indonesia, sitting on vast reserves of exactly the materials both superpowers need, now appears determined to play both sides from a position of strength.

Governance Reform or Risky Gamble?

Indonesian officials frame the move as a governance overhaul, not a political provocation. "This represents a governance reform, a step toward strengthening our credibility in managing strategic commodity trade in an orderly and accountable manner," said Yvonne Mewengkang of Indonesia's Ministry of Foreign Affairs.

Danantara plans to build a digital platform to monitor export shipments and verify that declared prices reflect fair global market rates. The goal, officials say, is transparency — not the capture of corporate profits.

But observers note that success will depend heavily on how the transition is managed. Whether foreign buyers, private exporters, and international markets accept the new framework — or flee from the uncertainty — remains to be seen.

What is clear is this: Indonesia has decided it is no longer willing to let others set the price for its most precious resources. How the world responds will shape global commodity markets, the US-China rivalry, and Southeast Asia's economic trajectory for years to come.

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Sources:

1. Reuters via Investing.com – Indonesia to bring commodity exports under centralised control: https://www.investing.com/news/economy-news/indonesia-to-bring-commodity-exports-under-centralised-control-president-says-4700776
2. The Diplomat – Indonesian President Announces Plan to Centralize Control of Key Commodity Exports: https://thediplomat.com/2026/05/indonesian-president-announces-plan-to-centralize-control-of-key-commodity-exports/
3. Jakarta Globe – What We Know So Far About Danantara Sumberdaya, Indonesia's New Export Entity: https://jakartaglobe.id/business/what-we-know-so-far-about-danantara-sumberdaya-indonesias-new-export-entity
4. Nikkei Asia – Indonesia's new export control rattles commodity buyers: 5 things to know: https://asia.nikkei.com/business/markets/commodities/indonesia-s-new-export-control-rattles-commodity-buyers-5-things-to-know
5. Asia Asset / Danantara digital export monitoring platform: https://www.asiaasset.com/sovereign-wealth-funds/indonesia-wealth-fund-danantara-to-oversee-natural-resource-exports-to-stem-us150-billion-annual-leakage/
6. Trading Economics – Indonesia Exports to China 2025: https://tradingeconomics.com/indonesia/exports/china

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