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In 2021, trade relations between Indonesia and China will reach their highest level in 20 years. China reported that trade between the two countries reached $85 billion. This figure is up 52% compared to 2020.

The data was confirmed by Djauhari Oratmangun, Indonesia’s ambassador to China, who said that “Indonesia is currently able to maintain its position in the 4th rank as the largest exporting country to China among other ASEAN member countries.” Indonesia’s position as an export partner to China rose one rank compared to 2020.

Despite a significant increase in trade, Indonesia is still at a disadvantage in this relationship. According to the Central Statistics Agency, although Indonesia experienced a general trade surplus in February with a total of $3.83 billion, in Jakarta-Beijing relations, Indonesia’s trade balance still experienced a deficit of $909 million.

Indonesia also has a significant debt with China. According to the latest Foreign Debt Statistics report, in August 2021, Indonesia’s debt with China totaled $21 billion. Of this figure, Indonesian private companies have the most debt, with a total of $19.46 billion, while the government and the central bank owe $1.67 billion.

According to INDEF economist Drajad Wibowo, the debt Indonesia owes to China is not transparent and is often based on off-the-books lending or unofficial loans.

On October 21, 2021, the Jakarta Post also reported that Indonesia has a “hidden debt.” The results of a study from the College of William & Mary revealed that debt totaled over $17.28 billion, the majority of which was met by state-owned enterprises involved in China’s Belt and Road Initiative.

One major project is the Jakarta-Bandung High-Speed Train (KCJB). The project is behind schedule and over budget. Project funds are estimated to experience $1.6 billion in overrun costs. This figure is quite far from the initial funding agreement of nearly $6 billion.

Indonesia has clearly experienced a trade crisis with China. Joko Widodo must learn from other countries regarding Chinese debt. Recently, Sri Lanka failed to pay its debts. At the end of April 2021, the value of Sri Lanka’s debt to China was $3.3 billion, which comprised 10% of the total debt. The fate of Sri Lanka is almost similar to that of Indonesia. China is one of Indonesia’s biggest creditors after Singapore, the U.S., and Japan.

While there will be growth of around 4% to 5% in 2022, the economy is still very vulnerable amid the pandemic and rising costs of basic goods caused by the war in Ukraine.

In addition, this existence is strengthened by China’s encouragement of economically vulnerable and highly dependent countries. At the end of 2021, Laos will be again a victim of China. Bloomberg reports that funding for the Kunning-Vientiane rail project is swelling. The debt has increased by 6% since 2015. On the other hand, in November 2021, according to a report by the Export-Import Bank (EXIM), China lent Uganda $207 million at 2% interest with a 20-year term which Uganda failed to repay. Consequently, China took over the Entebbe International Airport.

Joko Widodo needs to think about debt consequences outside of Indonesia, such as in Ecuador. On February 5, President Guillermo Lasso revealed that his government would open talks on trade and debt with Beijing. China is Ecuador’s largest lender, operating in the oil, hydropower, and mining sectors.

Investment, debt, and trade cooperation may continue. However, the government must be aware of the speculations carried out by China regarding the global order.

M Habib Pashya is a Master's student at Universitas Gadjah Mada majoring in International Relations. His academic research primarily focuses on Indonesia-China relations, Indonesia's foreign policy, and the U.S.-China-Taiwan relations.