Indonesia begins to embrace China’s yuan as trade and belt and road projects fuel uptake

An estimated US$2.7 billion’s worth of the country’s international trade was paid for using China’s currency in the first six months of this year

China has emerged as Indonesia’s largest trading partner over the past decade and is its second-biggest source of foreign direct investment

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A person holds a stack of Chinese yuan bank notes. Photo: Shutterstock

Published: 12:00am, 20 Sep 2020Updated: 12:54am, 20 Sep 2020

The use of China’s yuan in Indonesia has been gaining momentum in recent years on the back of infrastructure projects linked to Beijing’s Belt and Road Initiative and the growing number of Indonesian companies doing business with those in China.

Over the past decade, China has emerged as Indonesia’s largest trading partner, with bilateral trade reaching US$79.4 billion in 2019 – a tenfold increase on the figure in 2000, according to data provided to The Jakarta Post by Xiao Qian, the Chinese ambassador to the country.

He added that more than 2 million Chinese tourists per year had visited Indonesia in recent years, while China is also the second-largest host of Indonesian students, with more than 10,000 studying in the country.

Dino Patti Djalal – a former deputy foreign minister of Indonesia and founder of the informal China Policy Group of officials, academics and policy experts – said this fast growing trade volume had made it “more attractive” for Indonesian companies to use renminbi when dealing with Chinese firms, as “in the first place, the Chinese are pushing for this”.

The yuan will be one of the world’s main payment currencies in the future

Kimin Tanoto, Indonesia’s Gunung Steel Group

However, he noted that some Chinese companies still prefer “having US dollars in the bank given its relative strength”.