Beware of the "Flood" of Cheap Imported Chinese Products
China can justify deflationary conditions enough to lower the prices of goods and export them at low prices.
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The following article was translated using both Microsoft Azure Open AI and Google Translation AI. The original article can be found in Waspadai ”Banjir” Produk Impor Murah China
JAKARTA, KOMPAS — Indonesia needs to be alert and anticipate a "flood" of cheap imported Chinese products amidst the country's economic slowdown. Supervision and investigations of imported goods need to be further improved so as not to harm domestic business actors.
General Chair of the Indonesian Employers' Association (Apindo) Shinta W Kamdani, Sunday (18/2/2024), said that currently, the manufacturing industry in China is experiencing excess production. The domestic market is unable to absorb these products because people's purchasing power is weakening.
"In such condition, China may apply dumping or sell goods abroad at lower prices than in domestic market," he said when contacted in Jakarta.
Also read: China's deflation also triggers decline in Indonesia's export performance
Consumer and producer prices of goods and services are experiencing the worst deflation. This is a reflection of the weakening of people's purchasing power and at the same time, the domestic industry in China is being held back.
The National Statistics Bureau of China recorded that in January 2024, China experienced an annual deflation of 0.8 percent. The decline in the Consumer Price Index (CPI) is the largest drop in 14 years or since September 2009.
The prices of goods and services at the producer level also experienced a 2.5 percent annual deflation. The Producer Price Index (PPI) continues to follow a deflation trend for 16 consecutive months or since October 2022.
Anticipation
According to Shinta, China can sufficiently justify the deflation condition to reduce the prices of goods. Then, those affordable goods are exported to other countries, including Indonesia.
The Indonesian government needs to be cautious about the potential "flood" of Chinese import products. Strategies, mechanisms, and investigation capabilities as well as the enforcement of anti-dumping measures against imports from China need to be improved.
This effort, said Shinta, is very important and crucial to protect the domestic market and industry. The government can work together with relevant business associations to detect and investigate any symptoms of dumping and predatory pricing in the country.
China can justify the deflation condition to lower the prices of goods. Then, cheap valuable items are exported to other countries, including Indonesia.
In addition, monitoring and investigation of illegal import practices or import leaks need to be improved. This also includes the misuse of import permits.
"There is a need for strong sanctions and law enforcement if these practices are proven to prevent damage to the growth of the national industry and healthy business competition within the country," he said.
Based on data from the Central Statistics Agency (BPS), non-oil and gas imports in Indonesia in January 2024 were valued at 15.81 billion US dollars, a monthly increase of 0.48 percent and an annual increase of 1.76 percent. China remains the largest source of non-oil and gas imports for Indonesia, contributing 37.64 percent of the total import value.
The value of non-oil and gas imports from that country to Indonesia increased by 9.26 percent monthly and 11.86 percent annually to 5.95 billion US dollars.
Also read: The Era of the Chinese Miracle is Estimated to be Over, What is the Fate of RI?
The increase in imports has not been accompanied by an increase in exports as China is currently experiencing deflation. Indonesia's exports to China in January 2024 amounted to USD 4.57 billion, down 20.73% on a monthly basis and 12.92% on an annual basis.
The lower export value compared to import causes Indonesia's trade balance deficit against China to become larger. In January 2024, Indonesia's non-oil and gas trade balance deficit against China reached 1.38 billion US dollars. However, in December 2023, Indonesia still recorded a trade surplus with China of 318.7 million US dollars.
Trade agreement
General Chairman of the Association of Indonesian Export Companies (GPEI) Benny Soetrisno said that a number of Chinese importers admitted that domestic demand was indeed sluggish. This makes them reduce exports.
"In the midst of such conditions, China continues to push for exports so that its economic growth does not further decline," he said.
Updating and optimizing trade agreements with several countries is also necessary to reduce Indonesia's dependence on China.
According to Benny, in addition to anticipating an increase in imports from that country, Indonesia also needs to continue to improve new markets. For example, with countries in South Asia, Africa, South Asia, and the Middle East.
It is important to note that China's era of high economic growth is expected to come to an end soon. In addition, renewing and optimizing trade agreements with several countries is also necessary to reduce Indonesia's dependence on China.
Also read: Transfer Flows from World Trading Partners are Increasingly Strengthening
"The existing trade agreements that have been held by Indonesia are still not significant in boosting Indonesia's exports," he said.
According to data from the Ministry of Trade, throughout 2023, Indonesia has implemented three trade agreements. These three agreements are the Comprehensive Economic Partnership Agreement between Indonesia and the United Arab Emirates (IUAE-CEPA), the Regional Comprehensive Economic Partnership (RCEP), and the Indonesia-South Korea CEPA.