Strengthening Indonesia China Palm Oil Trade with Sustainable Practices 2025

Executive summaryStrengthening Indonesia-China Palm Oil Trade with Sustainable PracticesJune 2025 Trade is a vital pillar in the strategic and economic partnership between two of Asia’s most dynamic economies, China and Indonesia. In 2023, bilateral trade reached a record $139.41 billion, with China remaining Indonesia’s largest trading partner, accounting for 20% of total trade. Palm oil is essential to this relationship. In 2023, Indonesia exported over 4.29 million metric tons (MMT) of palm oil to China, valued at $3.88 billion. Together, Indonesia and Malaysia supply over 83% of the world’s palm oil, while China, as the second-largest global importer, is increasingly shaping demand patterns and sustainability expectations. This briefing paper highlights the growing urgency – and opportunity – of aligning palm oil trade with global sustainability imperatives. As frameworks such as the EU Deforestation Regulation (EUDR), environmental, social and governance (ESG)-driven investment mandates, and Scope 3 emissions disclosures gain traction, both producer and consumer countries must adapt. Indonesia and Malaysia are accelerating reforms in traceability, certification and smallholder inclusion, while China is signaling a shift towards green sourcing through platforms such as the Taskforce on Green Value Chains. Despite positive momentum, critical challenges remain. On the supply side, traceability is often undermined by “mini-mills” and unregistered producers, while certification systems remain fragmented and inaccessible for many smallholders. On the demand side, market sensitivity about costs, low consumer awareness and limited price premiums and regulatory incentives to promote the use of certified palm oil are key constraints. Bridging this gap is essential for ensuring that sustainability transitions are both inclusive and commercially viable. Ultimately, Indonesia and China are uniquely positioned to co-create a resilient, inclusive and deforestation-free palm oil value chain. This brief presents a roadmap of actionable steps – from mutual certification recognition and blended finance to sub-national collaboration and commercial innovation – that can serve as a blueprint for sustainable commodity trade and Global South leadership on sustainable development in the 21st century. Strengthening Indonesia-China Palm Oil Trade with Sustainable Practices 3