Seventy two years of diplomatic relations between Indonesia and China, both countries have trade imbalance. In 2021, a report indicated the negative trade balance reached around US$ 3 billion. The imbalance was due to China’s exports which reached US$ 56 billion while it imported US$ 53 billion from Indonesia.
China and Indonesia built their diplomatic ties since April 13, 1950. However, the ties were suspended following the failed attempt of Coup d’etat by the Indonesian Communist Party (PKI) on September 30, 1965. Fifteen years later, both countries resumed both the diplomatic and trade relations in 1989.
The trade imbalance, however, has been a source of tension in the relationship between the two countries, with Indonesia calling for increased access to the Chinese market for its products and for China to invest in Indonesia’s manufacturing and infrastructure sectors.
In July 1990, the two countries issued the Agreement on the Settlement of Indonesia’s Debt Obligation to China and the Communique on the Resumption of Diplomatic Relations, which consist of:
- November 1990: The MOU on the Establishment of a Joint Commission on Economic, Trade and Technical Cooperation and the Minutes on the Establishment of a Joint Commission on Economic, Trade and Technical Cooperation.
- November 1994: The agreement on promotion and protection of investment and the MOU on Cooperation in Science and Technology were signed.
Trade deficit gradually narrows
Although the 2021’s US$ 3 billion gap seemed high, but compared to 2017 the gap had been narrowed. In 2017, the trade between Indonesia and China reached a US$ 12 billion deficit while in 2019 it was US$ 17 billion.
| Period | Trade Flow | Reporter | Partner | 2nd Partner | Trade Value (US$) |
|---|---|---|---|---|---|
| 2019 | x | Indonesia | China | World | 27,961,887,116 |
| 2021 | X | Indonesia | China | World | 53,781,904,497 |
| 2019 | M | Indonesia | China | World | 44,930,598,575 |
| 2021 | M | Indonesia | China | World | 56,227,202,302 |
From the UN Comtrade, it was obvious that the trade gap has gradually narrowed. In 2020, Indonesia’s trade deficit to China reached US$ 8 billion and in 2021 it reached US$ 3 billion.
Products and commodities
In 2021, the largest commodities that Indonesia exported to China were grouped with code 27, which consisted of mineral fuels, mineral oils and products of their distillation; bituminous substances; and mineral waxes. The trade value reached US$ 17.8 billion. The second largest commodities, grouped with code 72, consisted of iron and steal, which trade value reached US$ 12.8 billion.
Meanwhile, China’s biggest export to Indonesia consisted of nuclear reactors, boilers, machinery and mechanical appliances – which was grouped with code 84 – with the value of US$ 12.5 billion. The second largest export was electrical machinery and equipments; sound recorders and reproducers, television image and sound recorders and reproducers, and parts and accessories of such articles. The value reached US$ 11.8 billion.
From the aforementioned data, it is obvious that Indonesia is still suffering from trade deficit against China. However, it managed to gradually narrow the gap. The government, of course, hopes Indonesia would eventually have a surplus in its trade with China.
