Indonesia, China to reduce US dollar in bilateral trade

Indonesia and China are closer than ever to reducing their reliance on the US dollar as they plan to start using their own currencies for bilateral trade and investment within weeks.

Vincent Fabian Thomas (The Jakarta Post)

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Jakarta

Mon, June 28, 2021

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A teller counts 100-yuan notes and US dollar bills at a bank in Nantong in China's eastern Jiangsu province on August 6, 2019. Indonesia and China plan to rely on their own currencies rather than the US dollar for bilateral trade and investment. (STR/AFP/-)

Indonesia and China are closer to reducing their reliance on the US dollar as they plan to start using their own currencies for bilateral trade and investment within weeks.

The switch to local currency settlement (LCS) is expected to take place in the third quarter of this year.

Bank Indonesia’s head of financial market development, Donny Hutabarat, said the move was part of Indonesia’s effort to diversify currencies used in trade and investment with bilateral partners. So far, Indonesia has agreed on LCS with Malaysia, Thailand and Japan.

“So, we do not depend 100 percent on the US dollar anymore,” Donny told reporters during an online media briefing on Friday.

“[LCS with China] will be implemented around July or [later in] the third quarter,” Donny said.

China is Indonesia’s biggest trade partner. According to Statistics Indonesia, China accounts for more than 32 percent of Indonesia’s imports and over 22 percent of exports.

BI and People’s Bank of China (PBC) began discussing the plan on Sept. 30, 2020, when BI Governor Perry Warjiyo and PBC Governor Yi Gang signed an agreement on LCS for bilateral trade and investment.