State-owned China Development Bank will provide 75% of the funding for the $US 5.5bn project with the remainder coming from the Chinese and Indonesian contractors. Construction will start next year on the line, which will run from Halim in east Jakarta and include eight stations. Operations are expected to start in 2019.
"This high-speed train will make it easier for the public to travel," said Mr Yang Zhongmin, chairman of China Rail International during the signing ceremony. "This major project will also provide major employment opportunities and boost the economy."
Despite the project being part of President Joko Widodo's plans to improve infrastructure in Indonesia, the Indonesian government repeatedly changed its mind over the project in a chaotic bidding process.
Japan appeared to be in pole position to secure the contract after conducting numerous studies and surveys. But with China entering the race with a counter offer in April, and Japan refusing to accept the Indonesian government's demands that the project is constructed without any state financial assistance or guarantees, China was left as the sole viable bidder.