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