JAKARTA (TimesofIDN) – Indonesia faces the risk of another influx of low-cost Chinese goods, potentially exacerbating pressure on its domestic manufacturing sector. A recent BCA report, Will another wave of China’s inventory upcycle incoming?, highlights how global trade dynamics and China’s need for new markets are driving its export surge, with Indonesia as a prime destination.
China’s aggressive export push stems from weak domestic demand and shifting global trade patterns, including a new trade agreement between the United States (US) and the European Union (EU).
On July 27, 2025, the US and EU finalized a deal imposing a 15% import tariff on European goods to the US, while the EU granted zero-percent tariffs on US products, committing to increased imports in energy and defense sectors.
This agreement, as cited by CNBC Indonesia, has triggered a trade diversion effect, with US exports to Europe displacing China’s role as a key supplier.
Consequently, Chinese manufacturers, previously reliant on the EU market, are now seeking alternative markets, particularly in developing nations like Indonesia.
This phenomenon is not new. Between 2021 and 2023, Indonesia experienced a flood of cheap Chinese goods, including electronics, textiles, and machinery, often sold below local production costs.
Data shows China’s share of Indonesia’s total imports surged from 20.6% in 2020 to 36.4% by May 2025, far outpacing imports from the US, which remained stagnant at around 5.4%.
For consumers, affordable imports could boost purchasing power amid limited income growth, potentially driving household consumption in the second half of 2025.
However, local manufacturers, especially small and medium enterprises (SMEs), face significant challenges. Indonesia’s Manufacturing Purchasing Managers’ Index (PMI) has signaled contraction since July 2024, dropping to 46.9 in June 2025, reflecting intense pressure on domestic industries.
BCA data reveals a sharp rise in imports from China in April-May 2025, particularly in electronics (up 23.8%, US$289.5 million), machinery and boilers (up 15.9%, US$230.7 million), base metals (up 19.6%, US$136.8 million), motor vehicles (up 43.8%, US$145.5 million), and chemicals (up 20.1%, US$122 million).
The textile and apparel sector saw a 25.2% import surge, despite a 1.3% decline in China’s inventories, indicating strong domestic demand in Indonesia.
Conversely, furniture imports grew modestly by 4.3%, while food imports rose only 2.1%, likely due to protective policies or consumer preference for local products.
Beverage imports, however, soared by 64%, albeit from a small base (US$0.5 million), driven by the popularity of instant or health drinks.
This import surge reflects China’s strategy to address its oversupply crisis, fueled by weak domestic consumption and a property market downturn.
While China’s export-oriented manufacturers benefit from foreign demand and government subsidies, Indonesia has become a key target for “dumping” cheap goods. The government and local industries must act swiftly to implement protective measures, such as tariffs, to safeguard the manufacturing sector and support long-term economic growth.
