This article examines Indonesia's perceptions and policies towards China during the New Order era (1965-99) and the prospects for bilateral relations in the post-New Order period. For the first two decades of President Soeharto's rule, Indonesian policy towards China was marked by hostility, and stemmed from the 1965 Gestapu Affair. Bilateral relations remained frosty until the mid-to-late 1980s when Soeharto initiated a gradual policy of rapprochement with China. This led to the restoration of diplomatic relations in 1990 and Indonesia's policy of engagement with China. Despite improved economic relations, a number of obstacles stood in the way of closer Sino-Indonesian relations in the 1990s. The new government of President Abdurrahman Wahid must tackle these obstacles if bilateral relations are to move forward in the twenty-first century
Relations between Indonesia wad the People's Republic of China (PRC) were characterized by hostility and suspicion during much of the New Order era, and witnessed only a gradual improvement in the 1990s. In 1967, a year after Soeharto became President, Indonesia suspended diplomatic relations with the PRC in retaliation for Beijing's alleged involvement in the 1965 Gestapu Affair, an abortive coup attempt carried out by elements of the Indonesian Communist Party (PKI), and seen by the Indonesian Armed Forces (ABRI) as an attempt by Beijing to turn Indonesia into a communist client state. For the next twenty years, the Indonesian leadership spurned all contact with the PRC, believing China's ultimate ambition was to assert hegemony over Southeast Asia by supporting regional communist insurgency movements, or through overt military action. Because Chinese Indonesians were also implicated in the coup, the ethnic Chinese community suffered widespread discrimination and persecution during Soeharto's rule.
Bilateral ties improved gradually from the mid-1980s onwards, motivated by domestic factors in Indonesia and China's more pragmatic foreign policy under Deng Xiao-ping. Direct trade between the two countries was restored in 1985, and diplomatic relations in 1990. Jakarta's new policy of engagement with China encouraged greater economic and political ties, a policy seen as beneficial to Indonesia's economic development and regional stability. Indonesia's policy of engagement helped improve bilateral relations, but a number of obstacles lay in the path of closer Sino-Indonesian relations. Firstly, the Indonesian leadership remained opposed to the communist ideology and continued to warn of the dangers of communism and a revival of the PKI. Secondly, discrimination against the ethnic Chinese community remained rife in the 1990s. This occasionally strained relations with Beijing, especially when racial tensions turned to violence. Thirdly, Indonesia's suspicions of China's regional intentions were reinforced by the PRC's increasingly assertive behaviour in the South China Sea. The Indonesian leadership was particularly concerned at China's claim over the territorial waters surrounding the Natuna Islands. The prospects for an improvement in bilateral relations seemed bright following the election of President Abdurraliman Wahid in October 1999. However, the existence of racial tensions, the continuing influence of the armed forces, and the unresolved territorial dispute present significant obstacles in the path of improved Sino-Indonesian relations.
Background: Sino-Indonesian Relations, 1965-85
In order to understand Indonesian perceptions and policies towards the PRC during the New Order era, it is necessary to outline the strained relations between the two countries during the period 1965-85. During the latter period of President Soekarno's rule, relations between Indonesia and China had grown closer as both countries pursued radical anti-Western and anti-imperialist foreign policies. Domestically, Soekarno relied heavily on the support of the Indonesian Communist Party (PKI), which itself had close links with the Chinese Communist Party (CCP). This close relationship between Indonesia and the PRC on the one hand, and the PKI and the CCP on the other, was a major concern for ABRI. Anti-communist sentiment was already strong within the armed forces, and stemmed from the 1948 communist uprising in Medan when ABRI was fighting for independence from the Netherlands. The armed forces also considered communism inimical to the national ideology of Pancasila, the 1945 Constitution, and national developmen t. 
On 31 October 1965, elements of the PKI tried to seize power in an event which became known as the Gestapu Affair. ABRI took this opportunity to put an end to communist influence in Indonesia by striking decisively at the coup leaders. In the aftermath of the Gestapu Affair, Soekarno, who had been implicated in the coup, was forced to transfer power to Major-General Soeharto, who established the New Order regime with himself as President. The leaders of the PKI were arrested, tried and executed, and the organization was banned. Hundreds of thousands of PM members and supporters were massacred in a bloodbath which followed the coup. The New Order blamed the abortive coup on the PKI which, they alleged, had received its instructions from Beijing. According to the official view, China's aim in supporting the coup had been to turn Indonesia into a communist satellite of the PRC. Although no evidence was ever produced to prove China's complicity in the coup, Beijing's pernicious influence in the events of 1965 be came an established fact. In September 1967, against a background of rising tensions between the two countries, Indonesia suspended diplomatic relations with China. Another victim of the Gestapu Affair was Indonesia's ethnic Chinese community. Long a target for racial persecution, they were singled out by the government as being the mainstay of PM support, although again, no evidence was ever produced. Thus, the government looked on the ethnic Chinese as "tools" of the Chinese Government who had worked to establish communism in the country. As a result, the ethnic Chinese community received harsh treatment. Chinese schools were closed down, the use of Chinese characters and language was banned, and the observance of Chinese festivals forbidden.
In the New Order, ABRI, with Soeharto at its head, occupied the apex of power, allowing it to exert a decisive influence over the conduct of foreign policy decision-making. The New Order prioritized economic development, and pursued closer links with those countries able to provide Indonesia with foreign aid and investment, such as Western countries and Japan.  Indonesia did not see China as being able to contribute to the country's economic development. Moreover, China was perceived as a security threat, and ABRI opposed all further contacts with the PRC after 1967. The armed forces believed that China's ultimate ambition was to dominate Southeast Asia by supporting communist insurgency movements and direct military action. ABRI warned that a Sino-Indonesian rapprochement would lead to a resurgence of communism in Indonesia, resulting in internal instability which, in turn, would impede economic development. Although China ended its material aid to regional communist movements in the mid-1970s in an effo rt to gain ASEAN's support for its anti-Soviet policies, Beijing continued to provide moral support to these parties, including the PKI. As far as Jakarta was concerned, China had to sever all links with regional communist parties, promise never to interfere in Indonesia's internal affairs, and apologize for its involvement in the Gestapu Affair before relations could be normalized. ABRI's suspicions of China's regional intentions were reinforced by China's 1979 attack on Vietnam, which was interpreted as an indication that the PRC was willing to use force in pursuit of its national interests in Southeast Asia, and that it was ready to interfere in the internal affairs of its neighbours in matters relating to the ethnic Chinese.  In the 1980s, Indonesia opposed China's policy of "bleeding Vietnam white", as it saw Vietnam as a useful buffer against perceived Chinese expansionism in Southeast Asia. Indonesia's opposition to this policy found expression in the 1980 Kuantan Declaration.  ABRI's sympathy fo r Hanoi, and its hostility towards Beijing, introduced significant strains within ASEAN during the Cambodian crisis.
The Indonesian Ministry of Foreign Affairs (MFA), however, held that Jakarta should pursue a more realistic and constructive policy towards China during the New Order era. This was particularly true after the Sino-U.S. rapprochement of 1972, and China's establishment of diplomatic relations with Malaysia, Thailand, and the Philippines in the mid-1970s. The MFA had supported China's application to join the United Nations in 1971, but the military had opposed the move, forcing Indonesia's U.N. ambassador to abstain.  Indonesian Foreign Minister Adam Malik was willing to restore diplomatic relations with China in 1973.  However, in the first few decades of the New Order regime, President Soeharto allowed ABRI's views on Indonesian policy towards China to prevail over those of the MFA.
Indonesia's Engagement Policy with China
In the mid-1980s, Indonesia began a process of cautious engagement with the PRC which eventually led to the restoration of diplomatic relations in 1990. The decision to improve relations with China was not, however, the result of changing perceptions within ABRI towards China. In fact, right up to the restoration of Sino-Indonesian relations, ABRI continued to view China through the prism of national security, warning that closer relations between the two countries would lead to a revival of the PKI. The change in policy was made by President Soeharto, who came to see the merits of a more constructive relationship with China.
Soeharto's desire to improve relations with China was motivated by three
factors. First and foremost were economic considerations. By the mid-1980s, the Indonesian economy was experiencing a downturn caused by a slump in global oil prices. Indonesia was keen to find new export markets for its primary commodities, such as petroleum, palm oil, and timber. The government identified China as a market with tremendous potential. By 1985, China's economic reform programme was in full-swing, and many of Indonesia's ASEAN partners were already taking advantage of this situation by increasing their exports to the PRC. The Indonesian Government was keenly aware that it was in danger of losing out to Malaysia and Thailand in terms of commodity exports to China. As a result of economic necessity, and against the advice of ABRI,  Soeharto allowed Indonesia to restore direct trade with China in July 1985. Secondly, Soeharto wanted Indonesia to play a more prominent role in world affairs, and was especially keen for his country to become the leader of the Non-Aligned Movement (NAM). A greater role in Asian affairs, and especially among developing countries, would require normalized relations with China. Thirdly, although ABRI continued to warn of the dangers of closer links with China, the Indonesian Government as a whole became more relaxed about the national security aspect of Sino-Indonesian relations. During the latter part of the 1980s, the Chinese Government had substantially scaled back its relations with regional communist parties. This was a reflection of improved Sino-Soviet relations (Beijing had always held that it could not terminate its links with regional communist parties in case the USSR-Vietnam supplanted its role) and China's more pragmatic foreign policy which emphasized economic modernization. Moreover, Jakarta realized that China's growing economic and military power was transforming the PRC into a major player in the Asia-Pacific region, and one which could not be ignored, especially given Indonesia's regional leadership aspirations.
The restoration of direct trade in 1985 was the first step towards improved Sino-Indonesian relations. The next step was to begin normalization talks. These talks were made possible by concessions from both Jakarta and Beijing. In 1988, Jakarta dropped its demand that China apologize for its alleged role in the 1965 Gestapu Affair. In February 1989, Chinese Foreign Minister Qian Qichen met with President Soeharto in Tokyo and assured him …