There is an Opportunity for Indonesia Amid the US-China Trade War

JAKARTA, KOMPAS — Indonesia, if careful, could seize opportunities in the trade war between the United States and China. China's extensive global business network could help boost the export of Indonesian products.

"The pressure on China is currently strong from the US and the European Union. At the same time, the purchasing power of the Chinese public remains sluggish," said Maxsensius Tri Sambodo, a researcher on economic issues at the National Research and Innovation Agency, in Jakarta, Tuesday (11/3/2025).

Chinese products are losing their competitiveness in Western markets. Additionally, U.S. President Donald Trump has imposed an additional 20 percent import tariff on products from China. As a result, some Chinese goods entering the U.S. face additional costs of up to 70 percent.

Within China, the prices of goods remain relatively high. The economy has yet to recover from the collapse of the property giant Evergrande, which consumed the savings and investments of the Chinese people. The sluggishness is further exacerbated by the Covid-19 pandemic.

China also retaliated against the US by imposing a 15 percent import tariff on US agricultural commodities. However, they must be cautious to ensure that striking the US does not harm their own people.

"China, as a major country, possesses technological advancements that cannot be underestimated. They also invest in other countries, which then become proxies to access Western markets," said Maxsensius.

In Indonesia, significant Chinese investments are present in Vietnam and Indonesia. According to the 2024 data from the Indonesian government, Hong Kong and China rank as the second and third largest sources of investment. Singapore holds the first position.

Maxsensius stated that Indonesia must truly be able to make decisions based on robust data. First, Indonesia ensures that investments from China increase, particularly in advanced technology sectors. Downstreaming of natural resources and the development of biotechnology and pharmaceuticals are strong areas of cooperation.

This type of investment helps Indonesia's ability to compete in the world. Indonesian products are of increasing quality and increasing export capacity and reach. Here collaboration to access China's global network is very important.

Second, Indonesia must also anticipate the risk of China dumping products. Given the sluggish consumption of Chinese society, they can sell their products to Southeast Asia at very cheap prices and kill local industries.

"The way, the government can do limited restrictions. This protection strategy is permitted by the WTO (World Trade Organization)," said Maxsensius.

High-tech products that do not stop in Indonesia are allowed to enter. These products can increase Indonesia's capabilities and competitiveness. For example, electronic products and electric vehicles that can be adapted to improve the quality of domestic products.

In contrast, imports of low-tech Chinese products are strictly regulated. This product will consume Indonesian products if its distribution is not regulated.

Meanwhile, in Beijing, the Chinese Communist Party has just completed its Two Sessions Congress. The event consists of the National People's Congress (NPC) and the Chinese People's Political Consultative Conference (CPPCC). The Congress announced a 5 percent economic growth target by early 2025.

However, observers say that economic growth is difficult to achieve if relying on market conditions. The Chinese government borrows more money from banks. The goal is to provide rebates to consumers who exchange old cars for new ones. Loan funds are also poured into the property market and help local governments.

At the Congress, the CCP also agreed to give more space to the private sector. They were given more loan ceilings and securities. In business, the government also gave the private sector more freedom, although it has not explained the form.

The ten richest provinces are believed to be leading China's economic growth. According to China's national news agency, Xinhua, these 10 provinces contribute 60 percent of China's gross domestic product, even though their total area is less than 20 percent of China's total area.

The ten provinces are Guangdong, Jiangsu, Shandong, Zhejiang, Henan, Hubei, Sichuan, Shanghai, Fujian, and Hunan. China has a total of 31 provinces.

Hangzhou in Zhejiang Province is known as a technology hub. Alibaba and artificial intelligence (AI) company DeepSeek are headquartered there. They are being touted as pioneers in the absorption of AI in everyday product consumption to improve service quality.

Guangdong Province as an automotive center develops various efficient future vehicles. Its production is also automated, relying on robots with AI so that it is fast and precise in its workmanship.

In addition, China is strengthening its regional cooperation. Sichuan and Chongqing have electricity sharing schemes to increase the market reach of both regions. Guangdong has administrative collaboration with Hong Kong and Macau.

"We are eradicating unfair competition between provinces and capturing a bigger market," Yang Decai, a Chinese political adviser from Nanjing University, told Xinhua.

Chinese Commerce Minister Wang Wentao said China will continue to fight the US trade war. Foreign Minister Wang Yi said selfish behavior only harms everyone.

One criticism is unhealthy competition in the country due to too many similar commodities. For example in the solar panel industry. Government subsidies produce many start-ups.

"But all these companies have the same strategy so the competition is negative," said Xiaomi CEO Lei Jun. (AP)