Since this year, due to the global COVID-19 pandemic, Sino-US trade friction and other factors, the transfer of global industrial and supply chains has been discussed by all walks of life. In addition to the hotly discussed Vietnam, Indonesia is also one of the important Southeast Asian countries undertaking industrial transfer.
Indonesia’s undertaking of industrial chain transfer has developed rapidly.
According to data from the General Administration of Customs of my country, in July 2022, the total value of imports and exports between my country and Indonesia reached 84.26 billion yuan, of which my country exported 44.81 billion yuan to Indonesia and imported 39.45 billion yuan from Indonesia.
From January to July 2022, the total value of imports and exports between my country and Indonesia reached 531.89 billion yuan, a cumulative increase of 28.7% over the same period last year. Among them, my country’s exports to Indonesia were 264.80 billion yuan, a year-on-year increase of 26.0%, and my country’s imports from Indonesia were 267.09 billion yuan, a year-on-year increase of 31.4%.
According to Indonesia’s Antara National News Agency, Indonesian Investment Minister Bahriel pointed out that in the first half of 2022, Indonesia has implemented a cumulative foreign investment of 310.4 trillion Indonesian rupiah (approximately US$20.7 billion). Among them, the top five sources of foreign investment (countries or regions) are Singapore with US$6.7 billion, Mainland China with US$3.6 billion, Hong Kong with US$2.9 billion, Japan with US$1.7 billion and the United States with US$1.4 billion.
Multiple advantages help undertake industrial chain transfer
Undoubtedly, the surge in Indonesia’s exports and foreign direct investment data has a lot to do with its undertaking of industrial chain transfers. Similar to other countries in Southeast Asia, the industrial chain undertaken by Indonesia mainly covers the categories of shoes, clothing and accessories, furniture and parts, electrical machinery, and telecommunications equipment.
Indonesia is still dominated by mid- to low-end industries in the value chain, mainly due to its human and material resources, low land prices and other costs. In addition, some Indonesian policies are also conducive to attracting foreign investment, assisting the development of the country’s processing industry, and creating jobs at the same time. For example, according to Indonesian Investment Minister Bahriel, the surge in Indonesia’s foreign direct investment data is mainly related to restrictions on the export of raw materials. Starting from January 1, 2020, Indonesia implemented a comprehensive ban on nickel ore exports. Senior Indonesian officials also said recently that Indonesia will issue nickel export tax regulations in the third quarter and plans to impose export taxes on nickel pig iron and ferronickel. This policy allows raw materials to be concentrated locally for processing and promotes foreign capital investment in domestic industrial facilities.
It’s both competition and cooperation.
Indonesia’s order transfer to China mainly focuses on terminal assembly, production and other advantageous links. Due to technology, infrastructure and other reasons, a large number of factories require China’s export of raw materials and spare parts, as well as supporting industries such as Chinese machinery and technical services to complete production. Due to the inextricable connections in the industrial chain, Indonesia is not only one of the competitors in China’s industrial chain, but also a collaborator of China.
According to Chinese customs data, the trade volume between China and Indonesia reached US$124.34 billion in 2021, a year-on-year increase of 58.4%. China has been Indonesia’s largest trading partner for nine consecutive years and Indonesia’s largest export destination for six consecutive years; China’s investment in Indonesia reached US$3.2 billion in 2021. In addition, relevant data shows that in 2021, Indonesia’s largest trading partner for non-oil and natural gas imports is China with US$55.74 billion, accounting for 32.66%.
At the beginning of 2022, the “Regional Comprehensive Economic Partnership Agreement” (RCEP) officially came into effect, including Indonesia and other ten ASEAN countries. Data show that from January to July 2022, ASEAN continued to maintain its status as China’s largest trading partner, with a total bilateral import and export value of 3.53 trillion yuan, an increase of 13.2%. As the main market of RCEP, the import and export scale between ASEAN and China accounted for nearly half of the foreign trade scale between China and RCEP trading partners in the first seven months. RCEP has also further promoted trade and investment cooperation between China and Indonesia.
The scale of order outflow is controllable and the impact is limited
Supply chain transfer is an inevitable part of development. With the adjustment and development of science, technology and industrial structure, mid- and low-end value chains that are replicable and replaceable will gradually move to countries with lower human and material costs. migrate. Starting from the British Industrial Revolution, there have been several large-scale waves of world-class manufacturing transfers around the world. From the United Kingdom to the United States, it moved to Germany, Japan, and later the Four Asian Tigers, until it moved to China in the early 1980s.
Li Xingqian, Director of the Department of Foreign Trade of the Ministry of Commerce, said at a regular briefing on State Council policies to promote the stabilization and improvement of foreign trade held by the State Council Information Office in June this year that since the beginning of this year, with the gradual recovery of production in neighboring countries, some of the goods that returned to China last year have Foreign trade orders are flowing out again. Overall, the scale of these order outflows is controllable and the impact is limited.
“The relocation of some industries is in line with economic laws. China has been the world’s largest exporter of goods trade for 13 consecutive years. With the continuous upgrading of domestic industries, the factor structure is changing, and some companies have taken the initiative to carry out global layout and integrate some of their The manufacturing process has been moved abroad, which is a normal phenomenon in the division of labor and cooperation in trade and investment.”