Chinese manufacturers, hit by the U.S.-China tariff war, are heading to Indonesia. With the domestic market in China shrinking due to economic recession, they see the potential for growth in Indonesia, which has a population of 280 million.
On the 27th (local time), The Wall Street Journal (WSJ) reported in an article titled 'Chinese manufacturers are searching the globe for new buyers' that "Chinese textile corporations are flocking to countries like Indonesia in search of new markets to replace the U.S."
The U.S. is China's largest export market, but the administration of Donald Trump imposed a 145% tariff on Chinese products, diminishing their price competitiveness. Last year, China exported approximately $500 billion (about 720 trillion won) worth of goods to the U.S., which accounts for about 15% of China’s total merchandise exports.
China's domestic economy is also in a state of recession. Following what is known as the 'Evergrande crisis', China's real estate market collapsed, leading to a slowdown in economic growth and a reduction in consumer spending among Chinese individuals. WSJ noted, "Consumer prices have stagnated, factory gate prices have declined for over two years, and imports have also decreased," adding, "This clearly shows how poor China's domestic consumption is."
If the tariff issue is not resolved, Chinese manufacturing will inevitably suffer great damage. According to Goldman Sachs, if exports to the U.S. decline, it is estimated that about 10 million to 20 million jobs in China will be impacted. With many Chinese manufacturers already struggling due to intense domestic competition and economic recession, a decrease in exports to the U.S. is directly linked to their survival. WSJ reported, "Chinese manufacturers must find new markets to export their products."
Potential markets to replace the U.S. include some countries in Europe and Asia. According to Allianz, the European Union (EU), the United Kingdom, Vietnam, Taiwan, Malaysia, Mexico, Singapore, Saudi Arabia, and Nigeria are among the countries most likely to absorb Chinese exports that were previously headed for the U.S. The export volume to these countries is expected to grow at an average annual rate of about 6% over the next three years.
Indonesia, in particular, is being evaluated as the most promising market. Indonesia ranks as the fourth largest country by population and has an economic growth rate of around 5%. This year, approximately 400 Chinese corporations registered to participate in the Jakarta Trade Fair, one of the largest textile and apparel exhibitions in Indonesia. This is more than double the number of domestic manufacturers in Indonesia, with many Chinese companies participating in the Indonesian fair for the first time, as reported by WSJ.
Wang Chengfei, a representative of a Chinese textile company selling polyester and nylon fabrics, also attended the fair. He explained that until recently, about 30% of his total sales were accounted for by exports to the U.S., but after the imposition of tariffs on China, about one-third of orders have been put on hold. He said, "I came here to explore the potential for entering new markets and to see if I can make up for the losses incurred in the U.S."
There is also the possibility of targeting the U.S. export market using the Indonesian market as a launchpad. The reciprocal tariff rate set by the U.S. for Indonesia is 32%, which is only one-fifth of the 145% tariff on China. Martin Sutanto, sales and marketing director of the Indonesian textile manufacturer Fabriku, noted that inquiries from agents for U.S. exports have increased.