Indonesia: One of the countries with the largest increase in China's import share

The COVID-19 has had a significant impact on China's imports, not only in terms of scale, but also in terms of structure. The innovation of trade methods has increased China's import channels, while the expansion of commodity categories and sources has better met the industrial chain and consumer demand. According to the United Nations (UN COMTRADE) statistics, there are a total of 219 countries (regions) from which China imports. From 2019 to 2022, Indonesia was one of the countries with the largest increase in China's import proportion (second only to Russia), rising from 1.7% to 2.9%, with a growth rate of 70.6%, 40.3 percentage points higher than the 30.3% increase in China's total import volume during the same period.
Indonesia is the largest archipelago country in the world, spanning 5110 kilometers from east to west and 1888 kilometers from north to south. It is composed of over 17000 islands of various sizes between the Pacific and Indian Oceans, and is truly a country of ten thousand islands. The tropical climate spanning the equator and active crustal movement have formed Indonesia's unique industries, products, and resource conditions. Indonesia has a large number of oil and gas basins and abundant reserves of oil and gas resources; With high forest coverage, it is one of the most important tropical forest countries in the world. Economic crops such as palm, rubber, coffee, and cocoa, as well as resource advantages in plywood, pulp, and paper production, make it the world's largest exporter of rattan; Rich marine fishery resources; Rich in mineral resources, tin, aluminum, nickel, iron, copper, tin, gold, silver, coal, etc. all have strong global competitiveness.

Over the past decade, China's market share in Indonesian exports has significantly increased. In 2013, Indonesia's exports to China amounted to $22.6 billion, accounting for 12.4% of its total exports. In 2022, Indonesia's exports to China reached $65.92 billion, accounting for 22.6% of its total exports. Over the past decade, Indonesia's exports to China have increased by 191.7%, far exceeding its 59.9% increase in total exports. That is to say, compared to 2013, nearly 40% (39.6%) of Indonesia's $109.43 billion increase in exports in 2022 went to China. In 2022, China will continue to maintain Indonesia's position as the largest export destination, not only 133.7% higher than the second ranked United States, but also almost equal the sum of Indonesia's exports to the second to fourth ranked countries (the United States, Japan, and India). Maintaining stable exports to China is in the interest of Indonesia's economic and social development.

From the perspective of trade structure, the commodity categories that account for over 50% of Indonesia's total exports to China include: metals 79.6%, pulp 76.4%, nickel 75.1%, oilseeds 69.8%, steel 68.2%, dairy products 58.5%, and plant fiber 50.1%. Marine products such as squid, cuttlefish, octopus, and seaweed account for a relatively high proportion of exports to China. Indian commodity exports have leveraged their resource and industrial advantages, and have also provided important raw materials and intermediate product guarantees for the development of China's economy and industry. After the Indonesian government adjusted and restricted the export policy of raw ore, the export volume of products processed with mineral resources has significantly increased. In comparison, Indonesia still has a relatively low share of exports to China. For example, only 9.5% of malt and starch are exported to China, 9.1% of inorganic chemicals, 7.9% of paper and cardboard, and only 4.0% of mechanical products are exported to China. There is still room for expansion in the direct or processed export of these Indonesian specialty products to China. There is also a possibility for further optimization of the industrial chain within the region, enhancing the ability of Indonesian manufacturing industries with distinctive advantages such as textiles, electronics, wood processing, steel, machinery, and automobiles to participate in the global value chain through international production capacity cooperation.
Affected by sluggish global market demand, Indonesian exports also experienced a significant decline in the first half of 2023. The significant decline in exports is in mineral fuels, natural gas, and mining. In June, Indonesia's nickel and its derivatives exports decreased by as much as 41.3% year-on-year, and the decline in precious metals and jewelry also reached 41.4%. Maintaining and expanding the import of energy and mineral products from Indonesia is conducive to reducing the impact of global geopolitical conflicts on the demand satisfaction of the Chinese market. In order to expand exports, the Indonesian government has increased publicity and encouraged small and medium-sized enterprises to actively utilize the Regional Comprehensive Economic Partnership Agreement (RCEP). The Indonesian Ministry of Trade has issued policy documents such as adjusting the customs tariff table and prohibiting the export of goods, enhancing the export capacity of enterprises by providing legal protection and improving trade facilitation, and finding export destinations for Indonesian goods through annual trade fairs and other means.
As the pioneer of the 21st century Maritime Silk Road, Indonesia has received positive attention and response from all parties. The comprehensive strategic partnership between China and Indonesia and the smooth progress of a series of cooperation projects, including the Yawan high-speed railway, have created favorable conditions for Indonesia to enhance its export capacity. The investment and production capacity cooperation of Chinese enterprises in major islands such as agriculture, mining and metallurgy, electricity, real estate, manufacturing, and industrial parks in Indonesia can help Indonesia enhance its product supply capacity and increase the added value of exported goods. The renewal of the local currency swap agreement between the central banks of the two countries (2022-2025) with a scale of 250 billion RMB/550 trillion Indonesian rupiah can provide more support for facilitating bilateral trade and maintaining financial market stability.