Chinese Capital’s Move into Upstream Oil Palm Plantations: Navigating Competing Sustainability Norms and Regulations in Indonesia

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Increasing demand from China has been one of the most important drivers of the global palm oil industry’s rapid growth in recent years. In 2021, China became the second largest importer of crude palm oil, only slightly below India, and above the European Union. A rise in domestic demand for palm oil has sent China in search of crude palm oil overseas, prompting investments in plantations and mills in producing countries, including Indonesia and Malaysia (Shigetomi et al. 2020). While Chinese overseas investment is not a new topic for scholarly or policy discussion, the controversial nature of the palm oil industry and the development of global standards for its sustainable production warrant our attention to better understand the relationship between Chinese investment, global norms, and local interests.As a rising global power, China has been increasingly active in expanding its economic presence through foreign aid and overseas investment. While many developing countries have welcomed this as an opportunity for their own economic development, there is a persistent suspicion—especially, but not exclusively, in the West—that the global expansion of Chinese capital will inevitably result in a broad range of actors in host countries becoming susceptible to Chinese influence. Likewise, observers have long warned of China’s use of economic instruments to create economic dependency, discussing China pulling nations into its ‘economic orbit’ and ‘carving out an empire’ (Harchaoui et al. 2021), and in the 2000s, there was talk of a ‘new scramble for Africa’, with China a key protagonist (Lee 2006; Chan-Fishel and Lawson 2007).This essay contends that such perceptions overlook the diversity of Chinese economic actors and their relative positions in different sectors. At the same time, observers often underappreciate the agency of actors in the host country in relation to Chinese actors, in part due to the often asymmetric economic and geopolitical power between the two. This essay departs from the simplistic argument and reveals the complexity of power relations among Chinese companies and local actors, particularly in an industry in which China is a relatively new player. To support this argument, we look at Chinese investment in the palm oil sector in Indonesia. We found that multiple actors in the country that is the world’s largest producer of palm oil leverage their interests by developing ‘local regulatory projects’, which constitute a set of redefined sustainability standards and policy innovations that pull Chinese companies closer to local interests, rather than vice versa. Amid mounting pressures on companies to comply with global sustainability standards, these projects have evidently enabled Chinese companies to claim they are complying with local regulations, adding a layer of complex interactions between global norms, Chinese capital, and competing local interests. One salient political dynamic is the increasing dependency of Chinese companies on Indonesian local political elites to protect their interests against opposition from the national government and local communities.
Original languageEnglish
JournalGlobal China Pulse
Issue number2
Publication statusPublished - 3 Mar 2023


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