Context and rationale1 Strategic role of palm oil In 2025, China and Indonesia celebrate the 75th anniversary of their diplomatic relations and the 70th anniversary of the Bandung Conference,1 marking renewed commitment to cooperation in trade, investment and sustainable development. In 2023, bilateral trade reached a record $139.41 billion, with China remaining Indonesia’s largest trading partner, accounting for 20% of total trade.2 This trade is supported by frameworks such as the ASEAN-China Free Trade Agreement (ACFTA) and the Belt and Road Initiative (BRI).3 Palm oil is essential to this relationship. In 2023, Indonesia exported over 4.29 million metric tonnes (MMT) of palm oil to China, valued at $3.88 billion – its third-largest export to China after coal and metals, and making up roughly 20% of Indonesia’s total exports to China.4 For Indonesia, palm oil is more than a commodity – it is a major contributor to the national economy, constituting 3.5% of the gross domestic product (GDP; $38 billion annually) and supporting over 4.2 million jobs, especially in rural areas. It is crucial for rural development and poverty reduction in key provinces like Sumatra and Kalimantan. As the world’s largest palm oil producer, Indonesia contributes to over 50% of global production, followed by Malaysia as the second largest, which contributes about 25% (Figure 1). For China, palm oil is essential for the food processing (65% of use), biofuels (20%) and consumer goods (15%) sectors. As the second-largest importer, it sources 94% of its palm oil from imports – primarily from Indonesia (76%) and Malaysia (24%). This dominant trade flow places Indonesia and Malaysia at the centre of sustainability discussions, with China as a pivotal actor in sustainable procurement. The central role of Indonesia and Malaysia in the global palm oil supply chain highlights continued leadership and capacity to meet rising global demand. Such economic interdependence provides an important opportunity to shape a shared future among people in China and Indonesia, especially under increasing sustainability expectations and international climate commitments. Global palm oil production FIGURE 1 1,000 metric tons 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-2490,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 Other Malaysia Indonesia Strengthening Indonesia-China Palm Oil Trade with Sustainable Practices 4

Strengthening Indonesia China Palm Oil Trade with Sustainable Practices 2025