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Abstract

There is a lively debate about the ‘China effect’ on economies in Southeast Asia that have embarked on industrialization in recent years.Will rapid growth and structural transformation of the Chinese economy undermine competitiveness in international markets of a low-wage country like Indonesia? This contribution focuses on the new challenges faced by industrialization policies in Indonesia with specific attention given to Chinese exports of similar types of products. Statistics on trade flows and revealed comparative advantage are discussed.This article also contains a historical background referring to two separate themes. The first concerns the economic position of Indonesians of Chinese descent, which goes far back in history. What does the ‘China effect’ mean to Indonesia, keeping in mind that a significant part of the Indonesian economy is dominated by Chinese Indonesians? Second, the necessity of an accelerated industrialization is considered in the context of the extreme dependence on world markets for an economy rich in natural resources like the Indonesian one. Does industrialization in competition with China imply exchanging one type of dependence for another?

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Indonesia and China Today

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