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China’s Exports and Imports Grow, Does Indonesia Get a Piece of the Pie?

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Jakarta, CNBC Indonesia – Data exports and imports from China grew in April, indicating that demand is improving despite uneven economic recovery. The release of this data certainly brings positive news for Indonesia, which is a trading partner of China.

China’s Customs Administration report shows that exports grew by 1.5% in April 2024 compared to the previous year, after experiencing a 7.5% decline in March, which was the first contraction since November. Imports surged by 8.4% in April, exceeding analysts’ expectations and rising from a 1.9% decline in March.

According to Reuters, China has implemented various policy support measures in recent months to bolster growth and enhance confidence in the world’s second-largest economy. China’s trade surplus grew to US$72.35 billion, up from US$58.55 billion in March.

However, the outlook ahead is not entirely positive considering broader global trends, analysts say. “We believe that export volumes will retreat in the coming months due to slowing consumer spending in advanced economies and reduced tailwinds from lower export prices,” said Zichun Huang of Capital Economics, as quoted by ABC News.

Export growth is primarily due to the lower comparison base from the previous year, Huang noted. He said that import volumes are likely to further recover in the near term due to “fiscal spending supporting import-intensive construction.”

The Increase of China’s Exports and Imports and its Impact on the Indonesian Economy

  1. Increasing Demand for Indonesian Products: With China’s export recovery, demand for raw materials and finished products from Indonesia may also increase. For example, if China strengthens its imports from Southeast Asian countries, Indonesia as a member of ASEAN may enjoy increased exports to the Chinese market. According to Trade Data, exports to China from Indonesia contribute 25.8% of the total country’s exports.
  2. Opportunities for Export Diversification: Increased demand from China can provide incentives for Indonesia to diversify its export portfolio. This could be an opportunity for Indonesia to expand its export markets, especially if certain products experience strong demand in China.
  3. Increased Foreign Exchange Income: As an exporting country, Indonesia will benefit from increased exports to China through higher foreign exchange income. Greater foreign exchange income can be used to strengthen Indonesia’s economic position, pay for necessary imports, and bolster the value of the rupiah. According to data from the Indonesian Ministry of Trade, Indonesia’s exports to China reached US$64.9 billion, with total exports reaching US$258.7 billion.
  4. Increased Foreign Investment: Increased exports to China can also attract foreign investors to invest in Indonesia. By leveraging China’s economic growth, foreign investors may see Indonesia as an attractive market to invest in industries that support China’s supply chain.
  5. Enhanced Bilateral Cooperation: Increased trade between China and Indonesia can strengthen bilateral relations between the two countries. This could open doors for more mutually beneficial trade and investment deals, as well as cooperation in technology, infrastructure, and other development projects.

Not only Indonesia, but the ten member countries of the Association of Southeast Asian Nations remain the largest destination for China’s exports, contributing 16.9% of the total for the first four months of this year. Exports to the US fell by 1.6% in April compared to the previous year. Shipments to the European Union also declined, dropping by 3.3% annually.

“Considering that import demand may remain robust but exports face higher levels of risk in the coming months, we expect a smaller contribution from trade to growth starting from the second quarter,” said Lynn Song, an economist at ING Economics, in a comment.

China has struggled to recover from the COVID-19 pandemic, facing weaker global demand after the Federal Reserve and other central banks raised interest rates to curb inflation. Declines in China’s property sector have also weighed on growth.

China has set a target for economic growth of around 5% this year, an ambition that will require more policy support, economists said.

The data indicates that a series of policy support measures over the past few months may have helped stabilize fragile investor and consumer confidence, although analysts say it is uncertain whether the surge in trade can be sustained.

“Export values ​​have returned to growth from last month’s contraction, but this is mainly due to the lower comparison base,” said Huang Zichun, a Chinese economist at Capital Economics. “After accounting for changes in export prices and seasonality, we estimate that export volumes remain largely unchanged from March,” he added.

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Indonesia’s Trade Surplus Narrows in February 2024 Due to Declining Exports

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Jakarta. Indonesia’s trade balance in February 2024 experienced a surplus for the 46th consecutive month. However, the surplus in February 2024 amounted to only $870 million (Rp 13.6 trillion), shrinking from $2.02 billion in January.

The Central Statistics Agency (BPS) reported exports worth $19.31 billion and imports valued at $18.44 billion in February 2024.

Indonesia’s trade surplus shrank as exports dropped by 5.79 percent compared to January 2024’s $20.52 billion. This decline was mostly due to lower exports in the manufacturing sector.

Amalia Adininggar Widyasanti, Acting Head of BPS, said oil and gas exports totaled $1.22 billion in February, down by 12.93 percent from January. Non-oil and gas exports reached $18.09 billion, a 5.27 percent decrease from the previous month.

“The decrease in February’s export value was driven by a decline in non-oil and gas exports, especially in iron and steel with a 3.26 percent decline, animal/vegetable fats, and oils with a 2.6 percent decline, as well as precious metals and gemstone jewelry with a 0.6 percent decline,” said Amalia during a press conference at the BPS office on Friday.

“At the same time, the trade balance in oil and gas commodities recorded a deficit of $1.76 billion,” said Amalia.

The three countries with the largest surplus contributors are the United States at $1.44 billion; India at $1.14 billion; and the Philippines at $627.8 million. The commodities contributing to the surplus with the United States are machinery and electrical equipment and parts, as well as non-knitted garments and footwear. Meanwhile, the three countries with the deepest deficit contributors are China at $1.8 billion, Thailand at $549.6 million, and Singapore at $317.1 million.

“The deepest deficit experienced with China is recorded in mechanical and mechanical equipment and parts; machinery and electrical equipment and parts; as well as plastic and plastic goods,” explained Amalia.

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Indonesia’s Trade Mission to Chile Targets Trade Value of Nearly Rp 16 Trillion.

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Jakarta – The Ministry of Trade led the Indonesian Trade Mission Delegation to Chile on May 9-10, 2024. The Director-General of National Export Development (PEN) at the Ministry of Trade, Didi Sumedi, stated that the trade mission aims to boost Indonesia’s trade value with South America through Chile.

This is a continuation of the utilization of the existing trade agreement between Indonesia and Chile, namely the Indonesia-Chile Comprehensive Economic Partnership Agreement (IC-CEPA).

“Through the utilization of the IC-CEPA trade agreement, the potential trade value between both countries can still be increased to US$1 billion (equivalent to Rp 15.9 trillion – at an exchange rate of Rp 15,977). The Trade Mission to Chile also serves as a contribution from the Ministry of Trade in supporting the National Export Enhancement Task Force, and Chile is one of the priority countries targeted for export growth,” Didi explained in his statement on Friday (5/17/2024).

“The Ministry of Trade is committed to continuously promoting Indonesian products to enter non-traditional markets, one of which is the South American region. Chile holds a strategic position among other South American countries as it can serve as an entry point for Indonesian products into the South American region,” Didi continued.

Didi conveyed that in this trade mission, there were nine business actors and associations participating. These business actors and associations operate in various sectors such as palm oil and its derivatives, pesticides, chemical products, vehicle spare parts, and packaging.

Meanwhile, the Indonesia-Chile business forum, attended by more than 70 Chilean business players, followed by one-on-one business matching between Indonesian companies and Chilean business players, has successfully recorded transaction potentials worth US$7.45 million or Rp 119.20 billion. The transaction potentials are generated from palm oil and its derivatives, motor vehicle spare parts, and plastic packaging.

Additionally, a business meeting was also held with the Confederation of Chilean Industries (Sociedad de Fomento Fabril/SOFOFA) and representatives of the Chilean Government in the field of international economic relations (Subsecretatia de Relaciones Economicas Internationales Chile/SUBREI).

The meetings aimed to encourage the involvement of Indonesian and Chilean business players, as well as broader and mutually beneficial cooperation between the two countries.

As part of the trade mission to Chile, several business visits were conducted, including to Supermarket Jumbo, importer of Mannheim automotive spare parts, furniture importer Area Design, and Indonesian bicycle importer Cross Mountain.

Supermarket Jumbo, the largest retailer in South America, has imported noodle products from Indonesia with various variants and flavors. Supermarket Jumbo expressed interest in trying coconut products from Indonesia.

In response to this, Didi welcomed the interest and would facilitate a meeting between Jumbo and Indonesian companies producing coconut products.

Didi mentioned that besides food and vehicle spare parts, the potential growth of the furniture industry in Chile is also very promising. During the visit to Area Design, a prestigious furniture supplier in Chile, Didi found that 70% of its products originated from Indonesia. Didi believed that through the preferential tariff scheme of the IC-CEPA, which has entered the implementation stage, Indonesia’s furniture export performance to Chile will continue to increase.

“Moreover, Indonesian furniture products can compete in the Chilean market in terms of price with similar products from other countries,” added Didi.

Meanwhile, during the meeting with Cross Mountain, a renowned sports product importer in Chile, Didi invited Cross Mountain, which has also imported mountain bikes from Polygon Indonesia, to take advantage of the tariff reduction scheme of IC-CEPA in increasing the volume and value of bicycle imports from Indonesia.

“Bicycles are one of the products that receive preferential tariff reductions under the IC-CEPA scheme,” explained Didi.

Meanwhile, the Director-General of International Trade Negotiations (PPI) at the Ministry of Trade, Djatmiko Bris Witjaksono, explained that Chile itself is a country with a very open economy. Chile has signed 34 Free Trade Agreements (FTAs) with 64 countries, including Indonesia.

Djatmiko mentioned that IC-CEPA itself eliminates 89.6% of the total tariff lines. Therefore, Indonesian business actors can take advantage of it through the use of the Certificate of Origin (COO) Form IC-CEPA.

“IC-CEPA has had a positive impact on increasing the trade value between Indonesia and Chile by 21.73% compared to trade value before IC-CEPA,” Djatmiko said.

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CIF is the Export-Import Payment Scheme, Here’s What it Means

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Jakarta – CIF stands for Cost, Insurance, and Freight. In this context, CIF is a term used in international trade such as export or import.

CIF is also referred to as Incoterms, which are common trade rules developed by the International Chamber of Commerce (ICC). Here’s what CIF means:

Definition of CIF

As reported on the Investopedia website, CIF is an international shipping agreement that represents the costs paid by the seller to cover the expenses, insurance, and transportation of the buyer’s order while the cargo is in transit.

Shipping a product via sea routes, oceans, or maritime routes using ships at sea will require CIF.

In trade shipping, CIF is used by the seller to indicate that the offered price already includes the cost of the merchandise, packaging, transportation to a specific destination, plus insurance costs.

In this CIF sales contract, the transported goods will be exported to the buyer’s port. Thus, the seller will bear the costs, insurance, and transportation of the buyer’s order while it is in transit.

The party paying CIF is the exporter or the seller. The transfer of risk occurs from the seller to the buyer when the goods are loaded onto the ship.

Once the cargo is delivered to the buyer’s destination port, the buyer is responsible for the shipping costs and import duties.

The buyer will take ownership of the goods upon arrival on the ship. If the cargo is damaged during transit, the buyer can file a claim with the seller’s insurance company.

Calculating CIF:

According to ICC rules, considered standard practice, the seller is responsible for the goods until the product reaches the buyer’s/destination port.

Quoted from ClickPost, here’s how to calculate the CIF value:

1. The cost price of the goods (as per the sales agreement between the seller and the buyer).
2. Shipping insurance until it reaches the destination port.
3. Transportation costs incurred until arrival at the destination port.

In addition, the seller also has to bear other costs included in the CIF value, which include:

1. Charges for loading expenses for shipping.
2. Customs inspection fees.
3. Route change costs (if necessary).
4. Export documents and customs duties.
5. Damages to the shipment (if not covered by insurance).

All these costs above will determine the CIF value for a particular shipment. This value represents the financial responsibility related to the shipment for all parties involved, including the buyer and the insurance entities.

The result of adding the CIF value will serve as a reference for transferring the responsibility of the goods in transit from the seller to the buyer/customer.

What’s the difference between CIF and CIP?

CIF is often associated with CIP (Carriage and Insurance Paid To) or carriage and insurance paid. The difference between CIF and CIP can be seen from the transportation route.

In this case, CIP can be used for shipping goods via any mode of transportation, such as trucks. Meanwhile, CIF can only be used for shipments via sea and water routes using ships.

In conclusion, CIF is the price paid to the exporter for a cargo of goods from the sender at the port upon importation.

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The Benefits of International Trade, Driving Factors, and Its Impacts

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Jakarta – International trade is conducted by every country. Forms of trade include importing and exporting goods according to each country’s needs. Read this article to understand what international trade is, starting from its definition, the benefits of international trade, driving factors, and its impacts (both in terms of benefits and drawbacks).

Definition of International Trade

In Aam Slamet Rusydiana’s journal titled International Trade: Comparative Study of Modern Economic Theory with an Islamic Perspective from the Ministry of Trade (Kemendag) website, international trade consists of two words, namely trade and international.

 

Trade means the activity of buying and selling goods or services in a particular place, where there is a balance between the demand and supply curves at the equilibrium point. Meanwhile, international means on a wide, global scale, not just in a particular region.

Thus, it can be concluded that international trade is a set of buying and selling transactions between buyers and sellers among countries in the form of exports and imports in a market, to achieve maximum profit for both parties.

 

Benefits of International Trade Quoted

from the book “Macroeconomics: An Introductory Theory” by Sadono Sukirno, here are four benefits of international trade:

  1. Meeting Domestic Needs, A country may not be able to meet all of its domestic needs, which can be due to geographical conditions, climate, and other factors. Even if it can produce goods domestically, production may not be efficient, making it easier to import from other countries. With international trade, countries can meet needs that cannot be produced domestically.

  2. Gaining Benefits from Specialization, The second benefit is gaining profits through specialization. A country may be able to produce a similar type of goods as another country, but sometimes it’s better for that country to import the same type of goods from abroad.

  3. Expanding Markets and Increasing Profits, Many entrepreneurs strive to expand their business markets to maximize profits. This may involve expanding business internationally.

  4. Transfer of Modern Technology, The final benefit is that international trade can be utilized for the transfer of modern technology. By importing modern technology goods from abroad, a country can more easily learn more efficient production techniques and modern management methods.

Driving Factors of International Trade According to the Ministry of Education website, here are several driving factors for international trade:

  1. Differences in Natural Resources, Each country has different natural resources, which also differentiate the production outputs of each country. For example, Indonesia produces palm oil, while Saudi Arabia produces crude oil, so they can trade with each other.

  2. Differences in Human Resource Quality, High-quality human resources are needed to manage natural resources. Countries with high-quality human resources will produce high-quality goods and services, which are needed by other countries.

  3. Differences in Science and Technology (Sci-Tech), Along with high-quality human resources, a country usually masters science and technology (Sci-Tech). If a country can master Sci-Tech, it can produce higher quality and more efficient goods and services.

  4. Differences in Culture, The cultural differences of each country influence the products produced. For example, Indonesia has high-quality batik products, which attract other countries to buy them.

  5. Differences in Prices of Goods, Production, and Preferences, Prices of goods may vary in each country due to differences in raw material prices or efficient production processes. Sometimes, instead of producing goods domestically, a country chooses to import cheaper goods.

Impact of International Trade Quoting from the book “Economics Module for Grade XI” (2020) by Sri Nur Mulyati SPd, MM, some advantages and disadvantages are the impact of international trade, as follows:

Benefits:

  1. Enhances cooperation between countries
  2. Meets domestic needs
  3. Saves production costs
  4. Increases national revenue
  5. Expands job opportunities

Drawbacks:

  1. Failure to adapt to the global market can lead to economic downturns.
  2. Local production unable to compete with imported products may be abandoned by consumers.

So, we’ve just learned about the benefits of international trade, along with its definition, driving factors, and its impacts on a country.

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Luhut reveals Indonesia’s plan to open express export routes to China.

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Jakarta – Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Pandjaitan, stated that Indonesia plans to open new export routes without passing through Singapore. According to him, Indonesia does not want to continuously serve as a feeder for shipping traffic to Singapore. Luhut wants the export of domestic products to be directly conducted from Indonesia. Therefore, Indonesia is collaborating with the Chinese government to open the Medan-Ningbo export route without transit in Singapore.

This is one of the discussions conducted by Luhut in the fourth High-Level Dialogue and Cooperation Mechanism between Indonesia and China (HDCM) with Foreign Minister Wang Yi in Labuan Bajo, on Friday, April 19th.

“We don’t want to just be a feeder to Singapore; we must be able to export directly from Indonesia. Let’s find partners. Ningbo is one of our partners that we will engage with,” expressed Luhut when recounting his meeting with Wang Yi on his Instagram account, @luhut.pandjaitan, seen on Monday (4/22/2024).

The plan is for Indonesia’s exports to East Asia to go through this new shipping route. Goods can be sent directly from Kuala Tanjung Port to Ningbo, China.

Luhut emphasizes that Indonesia will reduce its dependency as a feeder to Singapore. This represents Indonesia’s maritime sector independence.

“Later on, Kuala Tanjung can directly export and send containers abroad without needing to act as a feeder for Singapore. This is also a demonstration of Indonesia’s independence,” Luhut mentioned.

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U.S. Trade Deficit Rises to Record $74.4 Billion in March, Driven By Consumer Demand for Imports

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Shipping containers are stacked high at the Port of Los Angeles, on April 19. Imports increased 6.3% in the U.S. in March, the Commerce Department reported on Tuesday.

The U.S. trade deficit rose in March to a record $74.4 billion, driven by demand from American consumers for goods and services from overseas, the Commerce Department reported on Tuesday.

The deficit with China increased $6.7 billion to $36.9 billion in March, while the gap with Mexico increased $1.6 billion to $8.4 billion in March. The deficit with the European Union decreased $2.1 billion to $16.9 billion.

Overall, imports increased 6.3% to $274.5 billion, driven mainly by shipments of consumer goods like toys, furniture, phones and vehicles. Exports also increased, by 6.6%, to $200 billion. Industrial and capital goods led the increase.

As the global coronavirus pandemic eases and countries bring back their economies, the strength of the U.S. recovery is raising demand for goods and services beyond what domestic producers can currently meet. That leads to a rise in imports. The rise in exports also reflects the growing strength of other economies around the world.

In some ways, the increased deficit may actually be seen as a good thing as it suggests there are buyers in many countries looking for more goods and services. Given current supply chain, hiccups are also having an effect as companies seek to source their products from other countries.

Economists are forecasting a strong global recovery from the COVID-19 pandemic as vaccinations reach critical levels and restrictions on business and other establishments are loosened.

The U.S. economy expanded at a 6.4% clip in the first quarter, following a 4.3% rise in the fourth quarter of last year. Employment, meanwhile, continues to rebound, with 916,000 jobs added in March. Friday will bring the April jobs report, with economists expecting another strong increase.

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From spices to steel to drugs, India’s exports are being hammered

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if India has to become a developed country, it must push its exports because there is only so much it can consume domestically. China’s stupendous economic growth was boosted by its exports. India must focus on exports to achieve a consistent 10 per cent economic growth in the long run, Arvind Panagariya, Chairman of the 16th Finance Commission, has said. The government is already trying to increase exports through various measures.

Despite global trade uncertainties, India’s exports are charting a new course with bilateral agreements, free trade agreements (FTA) and uncharted territories like Africa, Latin America, and Central Asia. India has seen a surprising surge in exports of precious metals, minerals, automobiles, electronics, pharmaceuticals, organic chemicals, textiles, spices and defence equipment. The implementation of initiatives such as Production-Linked Incentives (PLI) and the Make in India campaign has fueled ..

Just as India tries to tap a huge export opportunity despite emerging and persisting geopolitical tensions that restrict movement of goods, it also faces strong challenges ranging from quality and trade restrictions. Two years ago, India-made cough syrups were linked to deaths of children in several countries. Now, Indian spices have come under scrutiny for contamination. The developed countries are also putting environmental restrictions on India’s exports.

Wrong turn on the spice route

Hong Kong and Singapore have reportedly banned the sale of popular Indian brands MDH and Everest after detecting carcinogenic chemical ethylene oxide in their products. This led to a mandatory recall from shelves. The primary violations in these incidents include the presence of ethylene oxide, a carcinogen used as a fumigating agent, and salmonella contamination, a common bacterial cause of foodborne illness.