Exporting Chinese manufacturing to Indonesia can boost ties for B&R initiative

By Hu Weijia Source:Global Times Published: 2017/2/13 0:08:39

Chinese smartphone manufacturer Xiaomi recently announced that it had started making handsets in Indonesia and the localization rate would reach 100 percent in 2017, media reports said. Chinese firms investing in Indonesia's manufacturing sector should be encouraged, even though some observers worry about the loss of jobs at home as manufacturing is relocated to Southeast Asian countries with low-cost labor.

Home to around 250 million people and the fourth most populous country in the world, Indonesia has a growing number of smartphone users, making its domestic market closely watched. It is understandable that Xiaomi has shown an increasing interest in Indonesia's burgeoning smartphone market despite a  new requirement from the government that fourth generation (4G) smartphones sold in the country need to be comprised of 30 percent of local components. Xiaomi's localization strategy will be able to help the Chinese company meet this content requirement.

The trend of manufacturers expanding their investment into Southeast Asia is a result of soaring labor costs in China and the urgent desire of Chinese firms to tap into the burgeoning market. Although manufacturing transfer may bring a blow to China's domestic job market, it is a process that China has to undergo to increase its economic presence in Indonesia.

Xiaomi also plans to further expand its Internet service in Indonesia, a move which is expected to create more than 1,000 jobs over the next few years. After China initiated the One Belt, One Road initiative, the two countries have enhanced cooperation in various areas including infrastructure construction. China needs to value its industrial capacity cooperation with Indonesia more than ever, because such efforts will allow more local residents to share in the benefits of the initiative. The Belt and Road initiative has received an increasing amount of attention in Indonesia as the two countries push the Jakarta-Bandung high-speed rail forward. Now both countries should further expand cooperation to ensure that the initiative is conducted in multi-level and multi-channel forums. 

The two countries share a large potential for manufacturing cooperation, as China is witnessing a boom in outbound investment and Indonesia is rolling out measures to boost the development of its export-oriented manufacturing industry. If Chinese investment could be a driver for job creation in Indonesia, then this will be a key factor for ensuring sustainable cooperation. If people want to strengthen bilateral cooperation to benefit both parties, it's better not to dwell too much on the question about whether Indonesia will be stealing Chinese manufacturing jobs.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn

Posted in: EYE ON THE ECONOMY

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