Slowdown of economic growth in China in quarter II-2013 from 7.7% against the previous 7.5% would definitely generate impact on Indonesia, as China was the biggest buyer of Indonesian products. So far the impact might not be visible, but soon or late it would, especially in sales off commodities.
The Government of RI must keep watch on the economic development in China, as China was one of Indonesia’s main trading counterparts. Data of the Central Board of Statistics [BPS] had it that Indonesia’s export of non oil-gas in May 2013 scored highest record at 1.72 billion, followed by Japan USD 1.44 billion USD and India USD 1.32 billion USD. Contribution of the three countries to Indonesia’s export in May 2013 came to 33.94%.
Over the period to January to May 2013 China was Indonesia main export destination country with export amounting to USD 8,556.1 million or 13.63%, followed by Japan 10.90% and the USA 9.97%.non oil-gas products included among others mineral fuel, fat and animal/vegetable oil, machines and electrical equipments, rubber and rubber products, machineries and mechanical instruments, metal ore and dust etc. the highest export increase in May 2013 against April 2013 was in fat and animal/vegetable oil.
The Government may be optimistic that Indonesian commodities exported to China were strongly competitiveness so price would remain high: but if demand dropped, price would drop accordingly. It was advisable for the Indonesia Government to constantly monitor and observer global countries like China, Japan, the USA and Uni Europe
The Asia Development Bank [ADB] rated that developing countries were stumbling head over heels in their economic growth, so it was necessary to revise their economic growth target to 6.3% for this year and 6.4% for 2014. The trend had happened in China and some countries were posting economic slowdown. By April prediction, growth of developing countries in Asia was 6.6% this year and 7.7% next year.
Meanwhile the Asian Development Outlook [ADO] for China this year was 7.7% and next year 7.5%. Southeast Asian countries had their GDP axed to become 5.2% against the previous 5.4% based on the assumption of last April but today again changed to 5.5% and next year 5.7%. Developing countries as Asia were having difficult in Semester 1 this year although the prospect was slightly better than developing nations.
In tune with ADB, the in international Monetary Fund [IMF] estimated global economic growth would slowdown to 3.1% by 2013 against the initial projection of around 3.3%. China’s economic growth would be predicted at 7.8%. The figure was average estimate of a number of economists compiled by Bloomberg News, but still below the three monthly percentage figure of 7.7%.
IMF noted that China’s economy in quarter two slowed down due to weakened factory output and had the risk of posting further weakening amidst Government’s effort to control credit expansion to avoid threat of financial crisis.
The Tax and Customs Dept reported that export dropped by 3.1% to the level of 174.32 billion while import inched down by 0.7% to become USD 147.19 billion USD. Meanwhile 20 economist surveyed by Dow Jones News Wires estimated increase of 3.3% for export and 5.5% for import.
One thing was sure that today China’s overseas trading was having serious problem. Low external demand was the main cause, followed by increased export price in foreign currency, labor cost, and trading environment worsened due to heightening trade dispute against Uni Europe.
In spite of downgrading of Asia’s economy, China’s economic growth was still the key factor to keep Asia’s economy from collapsing. ADO also described that the key of economic growth in China was domestic consumption, because laborers’ wages kept increasing while consumers’ trust remained high and sales of retail were just as high.
Beside China’s slow economic growth, demand also slumped from industrial states; and such burdened East Asian countries like Hong Kong and Taiwan. India’s economy was also troubled by low supply, sluggish investment and weakened economy.
Low inflation in India gave more room for monetary easing which could increase consumption and investment, but the paradox of it was slow GDP growth would control inflation on the demand side all over the country.
ADB projected inflation in Asia state at 3.3% on the average against the initial assumption of 4%. By next year inflation was projected to descend to 3.7% against the previous estimate of 4.2%. This downturn would have its effect on commodity price and economic slowdown. In general inflation pressures in developing countries in Asia was notably not to serve.
Back to China economic growth in this country slowed down in quarter two in line with low production, slow credit expansion and to minimize the risk of crisis in Finance. China’s GDP rose by 7.5% over the period of April-June against previous year especially quarter I around 7.7%.
Meanwhile growth of industry slowed down ever since the global financial crisis, while profit from retail sales was more than expected. Now many analysts and economists recommended the Government of China to exercise economic reformation. To exact, the Government of China must focus effort on economic restructurization and maintain sustainable.
As reported, production output of industry in China increased by 8.9% in June by early year. Retail sales in June increased by 13.3% initially after increasing by 12.9% in May. Growth of production posted slowest growth since the global financial crisis while retail sales esceeded expectation.
So far, China’s Primer Minister Li Keqiang refused to increase stimulus amidst his struggle with the industrial sector which posted over capacity and to control blowing up of credit. On the other hand, China’s Finance Minister Lou Jiwei said 6.5% economic growth would pose as no problem to China.
In line with China’s economic slowdown, some of the world’s industry from knife producer in Germany to plam plantation in Sumatra must come to terms with a changing world economic map. Many industries which used to be advantaged by high economic growth in China, now had to face problems. Other producers aiming at 1.3 billion Chinese consumers, were more fortunate. China’s economy was having anti-climax after reaching its peak in 2007 last; however lately the slowdown seemed to worsen.
The projected 7.5% growth this year would be recorded as the slowest since 1990. Some economists even suspected China would grow even slower than said level. Indonesia exporters to CPO and coal felt the impact of economic slowdown in China was felt the form decreasing demand and failing price.
The economy slowdown in China was felt in Indonesia by producers of commodity products, the sector which was most advantaged by economic booming in China. Study by Standard & Poor’s on more than 90 biggest companies in China showed that those companies would axe their total spending for the first tine in 10 years.
Investment in factories, production chain, metal melting facilities and telecommunication network tend to create demand for raw materials imported from China. Looks like this soaring demand for natural resources was coming to an end. The heartening side of it was that China was predicted to contribute 13% to the world’s total economy this year, higher against the 5% in 2006. So, in spite of slowed growth, the China effect on the worlds was still significant. China’s trading surplus which posted downturn of 14% in June 2013 posed as warning on this second economic superpower of the world. The condition was fearful as other economical activities were also dragged down.
The economic development in China posed as challenge to Asean states including Indonesia to revitalize economic growth. The direct impact was that demand from China would decline. Meanwhile the direct indirect impact was that demand from China’s trading partner countries as related to Indonesia’s export also affected.
The solution was to diversify products and export destination countries to manage trade balance to keep it form deficit while still maintaining greater domestic market potentials. (SS)
Business News - July 24,2013