Strengthening Indonesia China Palm Oil Trade with Sustainable Practices 2025

Strategic opportunities Despite existing challenges, the Indonesia-China trade in agricultural commodities holds strong potential to pioneer sustainable, inclusive and deforestation-free trade around the world. This can be achieved by aligning national priorities, mobilizing corporate innovation, fostering jurisdictional partnerships and advancing green finance. Broader dynamics – South-South cooperation, solidarity among the Brazil, Russia, India, China and South Africa (BRICS) grouping (which includes six new members, including Indonesia), and evolving green leadership – further enhance their strategic position. 1. Policy-level cooperation and bilateral alignment Indonesia and China can formalize sustainability commitments through bilateral recognition, policy harmonization on legality and traceability, and co-governance of digital systems. Platforms like the Indonesia National Dashboard and China’s TGVC offer areas for joint action. Indonesia and China can shape sustainability standards that reflect developing-country priorities while demonstrating leadership in the Global South. 2. Private sector innovation and market transformation Indonesia’s NDPE-aligned19 producers and China’s vast processing and retail sectors can drive transformation via joint procurement, long- term sourcing and traceability tools that reward sustainability and smallholder inclusion. 3. Sustainable finance and market-based incentives Financial actors can co-develop blended finance, green bonds and credit guarantees to support smallholder compliance. China’s growing green finance sector and ESG-aligned capital can accelerate sustainability transitions.4. Jurisdictional collaboration and local partnerships Direct links between producing regions (e.g. Riau and Kalimantan) and import hubs (e.g. Tianjin and Shanghai) can support jurisdictional collaboration on deforestation-free sourcing, shared data, green port certification and infrastructure. 5. Technical and technological collaboration China and Indonesia can explore close technical and technological collaboration on sustainable palm oil production by promoting and supporting regenerative agriculture, digitalization and monitoring technologies, thereby empowering the farmers who are vital to the process. 6. Other corporate practices More comprehensive approaches to assess whether palm oil is deforestation-free include assessment on the ground and from the sky. The former includes certification and verification (e.g. when Nestle partners with Earthworm Foundation for verification). The latter is through satellite monitoring of production sites (e.g. farms, mills and supply areas).20 If harnessed strategically, these opportunities can redefine Indonesia-China trade as a cornerstone of green and equitable transformation across the Global South. Approaches for assessing whether palm oil is deforestation-free FIGURE 5 Assessment on the ground Includes certification and verification (e.g. when Nestlé partners with Earthworm Foundation for verification)Assessment from the sky Through satellite monitoring of production sites (e.g. farms, mills and supply areas)3 Strengthening Indonesia-China Palm Oil Trade with Sustainable Practices 9