Global Journal of Interdisciplinary Social Sciences

Abstract

The Impact of Indonesia-China Trade Agreement on Indonesia Trade Performance

Jamilah, Bonar M.Sinaga, Mangara Tambunan and Dedi Budiman Hakim

This paper aims to analyze the impact of Indonesia-China trade agreement on Indonesia Trade performance. The study used is the simultaneous equation system model. The results of the study showed that the IndonesiaChina Agreement in trade has positive impact on Indonesia’s production, investment, trade and national income growth. Since CAFTA came in effect, the import tariff abolishment policy has had a positive impact on Indonesia’s production, investment, trade, trade balance, and national income compared to the previous period. If China’s economic growth reaches 14 percent, China’s export to Indonesia would increase, but Indonesia’s export growth would relatively small. China’s investment in Indonesia has increased, but its growth is relatively stagnant. The depreciation of the Rupiah against US$ has had a negative impact on Indonesia’s production and trade performance and has caused the national income to be deficit. Indonesia’s macro economic policies also strongly influence Indonesia’s trade performance.