The following is a sharing by Jianlong Hu, founder of the Passage Group and a Chinese media veteran. For the last 6 years, Hu has been actively tracking the globalisation of Chinese companies – here is his summary from a recent trip to Indonesia
I arrived in Jakarta on the 19th, primarily to host an innovation summit in Indonesia. I also wanted to take the opportunity to assess Chinese investments in Indonesia.
Therefore, after the meeting, I rushed to Semarang and went to Mayong in Jepara, Central Java to check on the situation of the Chinese-owned factories.
During the nearly one week stay, I met intensively with many investor and operator friends here. Compared to my last visit in May this year, the changes in the past six months have been significant:
- When you chat with friends from the tech and internet industry in Jakarta, you realise it’s still the same group of people.
The wave of Chinese internet companies going overseas happened around 2015, and most of those operating in Indonesia now are still those seasoned players. In recent years, there have been few new players. It seems like the golden age of mobile internet in China has ended, and the same conclusion can be drawn in Indonesia.
There are few new players, whereas the old players are deepening their moats. For instance, Tencent’s WeTV has opened its own office in Indonesia this year.
- The hottest topic in the social circle is still bubble tea / “new tea”, with Mixue leading the charge, having penetrated down to the township level in Indonesia.
I saw a Mixue store in Mayong; Brands like We Drink (茶主张）and Tianlala (甜啦啦） are also actively expanding.
Other brands like Ben Gong’s Tea (本宫的茶) have fewer stores; while brands such as Shuyi Tealicious (书亦烧仙草) are preparing to enter Indonesia.
The mass market segment of bubble tea is already quite competitive, with four bubble tea shops opening on a street just a few hundred meters long in Pantai Indah Kapak 2.
Friends in the bubble tea business say that the most intense competition hasn’t arrived yet; it will be more competitive next year, followed by a phase of consolidation.
Compared to bubble tea, coffee faces greater challenges going overseas. Cotti opened three stores, Tomoro has more, but they are far from the scale of local brands like Kopi Kenangan and Fore Coffee. (Note: For more on the coffee competitive landscape, see Momentum Works’ Coffee in Southeast Asia report)
- The rise of Mixue in Indonesia is driving its supply chain from Henan to Indonesia; for example, an ice cream cone factory plans to establish its own factory in Tangerang. Some new consumer brands that have succeeded in Indonesia, like the beauty brand Y.O.U, are also building their own factories in Indonesia. It’s inevitable that consumer brands will bring their own supply chains in this global expansion.
4. F&B is another hot topic of discussion.
Shu Guo Yin Xiang (蜀国印象) is an exception, you can see it in both high-end places like Plaza Indonesia in Jakarta as well as in the malls of Semarang.
In the chain restaurant industry, Jakarta is a bubble by itself; to judge whether a Chinese F&B brand is successful in Indonesia, you can’t look at just Jakarta. Only if the brand manages to open and survive in Semarang, Surabaya, or Yogyakarta, then you can tell if they are truly successful in the country.
However, I was disappointed to see that nearly all the chain restaurants in the two largest malls in Semarang are from Japan and South Korea. I could not find a Chinese brand and had to eat bibimbap.
Singaporean brands, such as Ta Wan, are already big names in Indonesia with long waits during peak dining times. In short, a strong “new-age Chinese dining concept”(中国新式餐饮) is virtually non-existent in Indonesia.
- As for consumer electronics brands, compared to May this year, I could clearly feel that Anker is accelerating its expansion through offline channels in Indonesia. I came across their stores in the city. They have also opened a new store in the Jakarta airport, focusing on headphones and speakers.
Anker’s competitor Aukey is not doing as well as Anker; I saw the doors of their stores covered in dust, not as “flashy” as Anker’s.
Insta360 (影石) seems to have some influence in Indonesia; I stumbled upon a multi-brand store that placed them alongside Japanese brands.
- The shift in manufacturing is really happening, and I’m talking about labor-intensive industries such as clothing, footwear and bags.
Taking Mayong as an example, there were only twenty to thirty mainland Chinese people in the town back in 2018, but now there are hundreds, especially since the reopening after the pandemic last year. Many of TopAsia Logistics’ (冠亚物流) clients are Chinese enterprises setting up factories overseas, and according to their country manager in Indonesia, they now serve about 15 bags manufacturers from China.
- The relocation of manufacturing does not only happen between China and Indonesia but also involves Chinese factories relocating from Myanmar and Cambodia.
Take Jepara as an example, it is arguably the most ideal destination for labor-intensive enterprises.
First, Central Java has a dense population, and Jepara’s population size is about the same as my hometown in Hubei province – over 1.2 million, providing ample labor supply, and with an industrial base, it’s relatively easy to find skilled workers.
Second, the wages are cheap; the average salary here is less than 1000 RMB (< US$ 141), lower than in Jakarta and Surabaya.
Third, the workers are easy to work with. Javanese people are known for their gentle nature; it’s rare to see conflicts in the streets or to hear verbal disputes. Central Javanese, in particular, are considered the most courteous and well-mannered among them, rarely organizing or causing disturbances.
- In high-value enterprises such as auto parts and new energy sectors we have not seen a significant presence of Chinese companies yet, or they are in the very early stages, primarily located around Jakarta and Surabaya.
Some other observations:
- Singapore holds a unique position in Indonesia. Despite its small land area, Singaporean banks and F&B brands are ubiquitous in Indonesia. The Singapore-Indonesia joint industrial park has attracted many Japanese, Korean, and Chinese companies.
- As Chinese companies venture into the Indonesian market, their main competitors will be Japanese and Korean enterprises. Whether it’s consumer electronics, mobile phones, home appliances, automobiles, or even F&B, Japanese and Korean firms have stronger dominance here. These sectors are where Chinese companies have a comparative global advantage. In the future, competition with Japanese and Korean companies will be inevitable.
Chinese businesses need to study and learn from the experiences of their Japanese and Korean counterparts earnestly.
3. Standing on the road in Mayong, watching the passing trucks and the emerging new factories, I feel as though I’ve returned to Dongguan in the 1990s. What awaits Mayong will undoubtedly be Indonesia’s own Dongguan.
Being in this entirely unfamiliar small town, I feel the pulse of globalisation beating strongly. In this rapidly changing ecosystem, the global role of Chinese enterprises is being repositioned.
4. The trip to Java is just part of my “leisure activity”. What exactly are we discussing when we talk about the supply chain shift from China? I look forward to seeing the real situation on the front lines overseas.
This may be why I’m delving deep into Bắc Ninh in Vietnam, Semarang in Indonesia, and planning a trip to Monterrey in Mexico in January next year.
Perhaps it’s the destiny of an “old media person” as I am, driven by curiosity. Of course, this is also a relearning process, as the people and events I encounter during my travels constantly recalibrate my perspectives.