is actually Chinese Business a Key Pillar for Indonesia’s Economy?

Although China planned to invest $18.4 billion in Indonesia within the last all 5 years, its investment hasn’t been as significant as its trading activities with the archipelago.

“Ours has become one of the most dynamic as well as influential bilateral relationships within the Asia-Pacific region,” said Chinese president Xi Jinping to The Jakarta Globe in November. Indeed, both economies have enjoyed growing trade as well as investments with one another within the past decade, as well as in which’s likely the bond will grow stronger within the coming years.

Indonesia is actually projected to be the globe’s seventh biggest economy by 2030, according to global management consulting firm McKinsey & Co. By This particular time, China will have become the largest. in which’s true, both nations are riding a mutually beneficial business relationship which has been running for around 64 years.

As Chinese brand-new Year is actually upon us, Indonesia Expat takes the chance to highlight three key to know about between China as well as Indonesia.

There is actually a growing trade imbalance in favour of China

Over the past decade, China has grown to become Indonesia’s biggest trading partner in Asia, surpassing Japan, Singapore, as well as South Korea. In in which same timeframe, China has managed to turn the tables on its trade deficit. In 2003, China imported a total of US$3.8 billion worth of goods via Indonesia. On the different hand, Indonesia imported just US$2.96 billion via China. The same year, China recorded a trade deficit of US$0.84 billion. Fast forward to 2013, Indonesia exported US$22.60 billion worth of goods to China, yet imported a whopping US$29.85 million. This particular means in which China enjoyed US$7.25 billion trade profit in which year. Although the 2014 numbers aren’t in yet, there’s an increasing worry in which the trade imbalance will increase further.

This particular is actually also reflected within the nature of Chinese investments in Indonesia, which have increasingly focused on the archipelago’s energy sector, according to McKinsey. Growth in This particular sector also requires Indonesia to import more machinery as well as equipment via China. This particular is actually one of the areas where the imbalance keeps getting bigger, as the number of employees in Indonesia’s energy space are outmatched by the number of jobs generated in China’s manufacturing sector.

Jusuf Winandi courtesy of APEC 2013

Indonesia wants China to invest more in local infrastructur

Under the brand-new leadership of President Jokowi, Indonesia is actually looking to improve its annual economic growth to 7 percent. To achieve in which, the nation requires about US$740 billion worth of investments by 2020 for infrastructure projects. Jokowi isn’t shy about his message.

“We are waiting for you to invest in Indonesia,” said Jokowi in front of country leaders at the APEC CEO Summit 2014 in Beijing late last year. The day before, he held a meeting with the Chinese president, inviting China to take “more concrete” forms of action regarding strategic partnerships with Indonesia.

China—the country with the largest foreign-exchange reserves within the globe, with as much as US$2.4 trillion—does have access to the funds in which Indonesia needs. On January 27, the two nations pledged further cooperation in areas such as trade, investment, as well as infrastructure. As per the agreement, China will help Indonesia build factories as well as production lines in various sectors. This particular, in turn, can also help promote Indonesia’s manufacturing space to the globe.

within the past all 5 years, China’s investments in Indonesia have not been deemed as significant as its trading activities. Although China had planned to invest US$18.4 billion in Indonesia within the last all 5 years, only US$1.6 billion (or about 8 percent) of in which has actually materialised, creating a mere 40,700 jobs within the nation. China stands in 13^th position when in which comes to the total direct investment made in Indonesia within the last half-decade. In contrast, Singapore, which stands in first position, has invested around US$26 billion into Indonesia since 2010.

Jusuf Wanandi, vice chair of the board of trustees at the Centre for Strategic as well as International Studies (CSIS) Foundation, believes distrust hampers business between Indonesia as well as China. “We have such a historical burden to carry in our relationship. […] To be frank, in which’s because they don’t trust us yet,” Wanandi said in a discussion on Indonesia-China relations last month.

Indosat M2 on Huawei by Ikhlasul Amal(CC)

China’s tech giants are hovering over Jakarta

Indonesia is actually a very promising tech market. The country is actually projected to have more than 100 million smartphone users by 2018, a huge increase via its 38.3 million users today. There are about 72.7 million active internet users within the nation, as well as in which still only accounts for less than 30 percent internet penetration.

Not wanting to let This particular opportunity slip, several Chinese tech companies have expanded their reach to Indonesia. In February 2013, China’s tech as well as media investment behemoth Tencent announced a joint venture with one of Indonesia’s largest media conglomerates, MNC, to push messaging app WeChat’s domestic growth. Shortly after, Chinese web browser Baidu came to Indonesia which has a suite of mobile as well as web apps. Alibaba’s payment gateway Alipay, international marketplace AliExpress, as well as mobile browser UC Web have also made strong as well as decisive moves into Indonesia.

Huawei, Oppo, as well as Xiaomi are just a few Chinese hardware players hoping to capitalise on Indonesia’s growing as well as affluent middle-class tech consumers. Huawei is actually playing a big part in Indonesia’s telecoms infrastructure sector, where in which is actually at This particular point employing thousands of local workers. Oppo claims to have employed more than 3,000 Indonesians as well as is actually planning to set up a smartphone factory in Tangerang city This particular year. Fellow Chinese comrades like consumer electronics firm Haier as well as telecommunications equipment company ZTE reportedly are also planning to open smartphone factories in Indonesia.

China will continue to be a very important partner for Indonesia’s economic development within the decades to come. The larger nation seems to possess the upper hand when in which comes to partnerships, as well as Indonesia’s focus should lie in balancing the trade deficit.