General

Since the beginning of this year, due to the global new crown pandemic, Sino-US trade friction and other factors, the transfer of the global industrial chain and supply chain has been discussed by all walks of life. In addition to the hotly debated Vietnam, Indonesia is also one of the important countries in Southeast Asia to undertake industrial transfer.

Indonesia has developed rapidly in undertaking industrial chain transfer.

According to customs data, 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.

According to customs data, 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%.

Indonesian Investment Minister Bahlier pointed out that in the first half of 2022, Indonesia has implemented a total of 310.4 trillion rupiah (about 20.7 billion US dollars) of foreign investment. Among them, the top five foreign investment sources (countries or regions) were Singapore US$6.7 billion, Mainland China US$3.6 billion, Hong Kong China US$2.9 billion, Japan US$1.7 billion and the United States US$1.4 billion.

Multiple advantages help to undertake industrial chain transfer

Undoubtedly, the soaring data of Indonesia's exports and foreign direct investment has a lot to do with the transfer of its industrial chain. Similar to other countries in Southeast Asia, the industrial chain undertaken by Indonesia is mainly in the categories of shoes, apparel and accessories, furniture and parts, electrical machinery, and telecommunications equipment.

Indonesia's value chain is still dominated by mid-to-low-end industries, mainly due to its low cost of human and material resources and land prices. In addition, some policies in Indonesia are also conducive to attracting foreign investment, boosting the development of the domestic processing industry, and creating employment at the same time. For example, according to Indonesian Minister of Investment Bahlier, the surge in foreign direct investment data in Indonesia is mainly related to restrictions on the export of raw materials. Since January 1, 2020, Indonesia has implemented a comprehensive ban on the export of nickel ore. Senior Indonesian officials also said recently that Indonesia will release nickel export tax regulations in the third quarter, and plans to levy export taxes on nickel pig iron and ferronickel. This policy concentrates raw materials for local processing and promotes foreign capital investment in domestic industrial facilities.

Both competition and cooperation

Indonesia's order transfer to China mainly focuses on advantageous links such as terminal assembly and production. Due to technical, infrastructure and other reasons, a large number of factories need China's raw materials, spare parts to export, as well as China's machinery, technical services and other supporting industries to complete production. Due to the inextricable links in the industrial chain, Indonesia is not only one of the competitors of China's industrial chain, but also a collaborator of China.

According to customs data, the trade volume between China and Indonesia will reach 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 has remained Indonesia's largest export destination for six consecutive years. In 2021, China's investment in Indonesia will reach 3.2 billion US dollars. In addition, according to customs data, in 2021, Indonesia's largest trading partner for non-oil and natural gas imports will be China with US$55.74 billion, accounting for 32.66%.

At the beginning of 2022, the Regional Comprehensive Economic Partnership (RCEP) officially entered into force, which includes ten ASEAN countries including Indonesia. According to customs data, from January to July 2022, ASEAN will continue 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 volume between ASEAN and China accounted for nearly half of the foreign trade volume between China and RCEP's trading partners in the first seven months. RCEP has also further promoted the international trade and investment cooperation between China and Indonesia.

The controllable impact of the outflow of orders is limited

Supply chain transfer is an inevitable part of development. With the adjustment and development of science and technology and industrial structure, the low-end value chain with reproducibility and substitutability will gradually move to countries with lower human and material costs. migrate. Since the British Industrial Revolution, there have been several large-scale waves of world-class manufacturing transfers across the globe. From the UK to the US to Germany, Japan and later the Asian Tigers, until the early 1980s to China.

Li Xingqian, director of the Department of Foreign Trade of the Ministry of Commerce, said at a regular briefing on the State Council's policies to promote the stability and improvement of foreign trade held by the Information Office of the State Council in June this year that since the beginning of this year, with the gradual recovery of production in neighboring countries, the part that returned to China last year Foreign trade orders flowed 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. This is a normal phenomenon of international trade and investment division of labor and cooperation.”