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How China beats US as trade, investment partner for Indonesia
China has topped other countries, including the United States, as Indonesia’s biggest trading partner. The East Asian giant is also a perfect fit for the government’s interest in developing Indonesia's downstream nickel industry.
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A train passes the Jakarta-Bandung high-speed railway project in Cipatat, West Bandung, West Java, on May 27, 2020. (Antara/Raisan Al Farisi)
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ndonesia has gotten closer to China than the United States in goods trade and foreign direct investment in the past few decades, benefitting from the rapid development of the world’s second-largest economy.
Indonesia’s trade with China picked up following the East Asian giant's accession to the World Trade Organization in 2001. Trade between the two countries grew further after ASEAN implemented a free trade agreement with China, called ACFTA, in 2010.
In 2020, exports to China accounted for 19.45 percent of the total, expanding from 4.45 percent in 2000, according to the United Nations Comtrade Database. The share of imports from the country also expanded to nearly 28 percent in 2020 from 6.03 percent in 2000. This growth puts China as Indonesia’s top trading partner.
At the same time, the share of exports to the US shrank to 11.43 percent of the total in 2020 from 13.66 percent in 2000, UN Comtrade data shows. The proportion of imports from the US also fell to 6.10 percent in 2020 from 10.12 percent in 2000.
“[ACFTA] is one of the dominant factors that turned Indonesia’s trade balance with China from a surplus to a deficit, initially,” said Andry Satrio, an economist at the Institute for Development of Economics and Finance (Indef). “[China's trade] volume and value also became higher than the US.”
Trade between Indonesia and China grew as the latter became the world’s largest coal importer. On the other hand, Indonesia is the world’s largest coal exporter. Aside from coal, China is also the main destination for Indonesian crude palm oil (CPO), one of the country’s key export commodities.
