China Premier Strives for Trust, Investment with Indonesia

Chinese Premier Wen Jiabao visited Indonesia, promising $19 billion in investment credit in the form of commercial loans and export credits. His visit is widely interpreted as China’s attempt to win influence over at the expense of its relationship with the U.S. From Reuters:

China is vying with the United States for influence in Indonesia and Southeast Asia in general, the site of strategic sea lanes and resources that it needs to power its economy.Many people in the region see the United States as a bulwark against a dominant China.

Wen held a singsong with Indonesian students, met Indonesian President Susilo Bambang Yudhoyono and then announced $9 billion of soft and commercial loans for infrastructure development and another $10 billion of export credits.

He said China would also give a billion yuan ($154 million) for maritime cooperation.

“The widening trade gap between us and China is worrying because our market is open to them, and we exported commodities their way, but they don’t open their market to us,” Hartarto Airlangga, chairman of the parliament’s trade commission, told Reuters.

China is already Indonesia’s largest trading partner, with bilateral trade at nearly $34 billion last year, but China’s total investment in manufacturing is a meagre $170 million.

Both China and the United States are seeking to catch up on investment opportunities, eyeing the country’s surging domestic consumer demand and position as a major exporter of resources such as coal, gas, tin and palm oil.

Indonesia has significant relations with the U.S. and China but its relationship to both takes on very different forms. The U.S. emphasizes democratization while China is almost exclusively focused on trade. From Voice of America:

Last year when President Barack Obama visited Jakarta, the U.S.-Indonesia bilateral talks focused in large part on education and democracy building. Friday the Chinese Premier came to Indonesia, and the talk was almost exclusively about trade and investment.

Natalia Soebagjo is the chairperson of the Center for Chinese Studies at the University of Indonesia. She compared the Chinese Preimer’s visit to Indonesia with President Obama’s visit last year and says unlike Indonesia’s complex relationship with the United States, trade dominates its ties to China.

“When the Americans come to Indonesia the focus is primarily on issues related to democratization, if you look at the USAID programs a lot of it is also related to democratization, also a little bit of economic empowerment. Whereas the Chinese when they come, it is just about money,” said Soebagjo.

Indonesia is Southeast Asia’s biggest economy and ties with China have been growing for years. Since the two countries signed a strategic partnership agreement in 2005 trade between China and Indonesia has increased from $12.5 billion to over $42 billion in 2010. A Chinese official said Friday they want to double that number by 2015.

April 29, 2011, 9:57 PM
Posted By: