Indonesia’s trade balance with China continues to run a deficit

Indonesia's trade balance with China continues to run a deficit

As of October 2019, Indonesia’s trade deficit with China has reached 15.2 billion US dollars. In the past year, Indonesia had a total trade deficit with China of 18.4 billion U.S. dollars, the highest trade deficit with China in the history of Indonesia.

Since the two countries signed the Free Trade Agreement (FTA), Indonesia has been flooded with various industrial products imported from China to subtropical fruits. As a result, in 2018, Indonesia’s imports from China reached 45.54 billion US dollars. Indonesia’s exports to China are only $ 27.13 billion. Therefore, Indonesia’s trade deficit with China reached the US $ 18.4 billion in 2018.

By far, Indonesia’s biggest exports to China are coal and palm oil (CPO). In 2018, Indonesia’s exports to China increased by 22.6%, but due to the greater increase in imports from China, Indonesia’s trade with China inevitably experienced a deficit. Products from China have also flooded the Indonesian market, as their prices are cheaper than products from other countries.

Reducing the trade deficit with China can be achieved by increasing exports to China. Of the 1.4 billion people, the middle class has reached 300 million, and China needs to import many tropical foods and beverages, including fish and other marine products, from Indonesia. In addition, China is also interested in Indonesian furniture and batteries. If it can be maximized, the Indonesia-China trade deficit can be reduced or even positive.

Currently, some Indonesian food and beverage products have entered China, including Kapal Api coffee products and Indocafe, Indomie, and bird’s nest products. If properly managed, exports of bird’s nest products can reach $ 3 billion. Currently, bird’s nest beverages are priced in China.

Indonesia can reduce its trade deficit with China by exporting aquatic products. The biggest export potential is Indonesia’s fish and various seafood. Fish and various seafood are favorite foods of the upper middle class in China. With 70% of the sea area in Indonesia, Indonesia can become one of the world’s seafood exporters.

Indonesia has great potential to increase exports and reduce its trade deficit with China. What is important is creativity. Business creativity is needed to fill business opportunities in the Chinese market. Just as “Tango” biscuit products and “Elips” shampoo do, these products have already entered Alibaba, China’s largest e-commerce company in the world. Indonesian products are expected to enter Alibaba more and more, and half of the world’s most populous Chinese population is using e-commerce.

In addition to increasing the export share and reducing the trade deficit with China, it can also replace industries with imports. If the domestic industry is ready to produce products that replace the original Chinese imports. For example, it is not difficult to produce steamed bread, because it is not a high-tech product, and its raw materials are also available in China.

From January to October 2019, the import value of steamed buns was USD 106,127, and the quantity was 292,444 kg. If you look closely, the gimmicks imported from China amount to 291,437 kilograms, worth US $ 106,062. The remaining only 7 kg comes from Japan and is worth $ 65. The Central Statistical Office (BPS) even recorded that during the period of 2015-2018, all gimmick imports came from China.

Plutonium can also prevent the inflow of imported products through a series of tariff policies without having to violate World Trade Organization (WTO) rules. For example, the government has adopted many policies to prevent markets that may harm the domestic textile industry and produce textile products.

In order to protect domestic products, the government has formulated additional safeguard measures or import duties. The government immediately implemented safeguard rules through three Ministers of Finance Regulations (PMK). The three Ministers of Finance regulations (PMK); are PMK 161 / PMK.010 / 2019, PMK 162 / PMK.010 / 2019 and PMK 163 / PMK.010 / 2019. These three regulations have entered into force on November 9, 2019 and are valid for 200 days.

Based on these three regulations, the Ministry of Finance has formulated the “Provisional Safeguard Measures Import Tax” (BMTPS) tariffs on several types of imported yarn products (excluding sewing threads), 6 types of synthetic fibers and staple fibers, 107 types Duty and curtain policy for fabrics. In addition, shutters, mosquito nets and other furniture have a total of 8 tariff points, the amount of which is the same as the tariff stipulated in the temporary safeguard measure import tax (PMK).

It is indeed necessary to restrict the import of textiles from China. The reason is that about 70% of textiles, yarns and other textile products come from China. The flood of textiles imported from China has hit China’s textile industry. Many domestic textile manufacturers have lost their lives because Chinese textile products are cheap, resulting in textile products produced by Chinese textile manufacturers that cannot compete with foreign products. Textile products from China that are legal or illegal have not only entered Indonesia, which has worsened the situation of the domestic textile industry.

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