Indonesia’s micro, small, and medium enterprises are facing increasing challenges due to the influx of low-cost imports from China, raising concerns about the nation’s industrial future and economic autonomy. Recent trade figures reveal that China now represents over a third of Indonesia’s total imports, underscoring a growing trade imbalance.
In January 2025, imports from China amounted to approximately $6.37 billion, constituting about 35.5% of Indonesia’s overall imports, as per a report by Financial Post. From traditional markets in Surabaya to online stores in Jakarta, numerous MSMEs are ceasing production and transitioning to selling Chinese-manufactured goods.
These enterprises, which employ nearly 90 to 95% of Indonesia’s workforce, shifting away from manufacturing is viewed as a red flag for the broader economy. Indonesia’s Minister for MSMEs, Maman Abdurrahman, has warned publicly that more entrepreneurs are discontinuing local production due to their inability to compete with the competitive prices of Chinese imports.
Many are opting to import finished products to stay afloat, a trend that is undermining Indonesia’s local supply chains. China’s manufacturing edge stems from extensive state-led industrial planning, large factories, and closely interconnected supply chains, enabling Chinese producers to manufacture goods faster and cheaper than most Indonesian firms, particularly small businesses facing challenges with outdated equipment and limited financial access.
The issue is exacerbated by inadequate enforcement of trade and regulatory standards. Numerous Chinese imports reportedly enter Indonesia without proper labeling, certification, or adherence to halal and quality criteria. Conversely, local producers must adhere to stringent regulations that escalate costs and hinder production speed.
In certain instances, Chinese textiles and garments are suspected to enter the country illicitly and later rebranded to appear domestically produced. Indonesia has attempted to levy anti-dumping duties on certain products, but enforcement has been inconsistent. Concurrently, China has imposed anti-dumping measures on Indonesian steel exports, reinforcing perceptions of unequal treatment in trade practices.
The textile sector is bearing the brunt of these challenges, once a cornerstone of Indonesia’s manufacturing sector. Factories are shutting down, jobs are being shed, and traditional industries like batik and handloom weaving are struggling to compete with mass-produced fabrics from China. Beyond economic repercussions, there are mounting concerns that Indonesia’s cultural sectors could be marginalized by cheaper imports.
