Jens Presthus, a senior associate at strategic advisory firm Global Counsel, says that China has faced accusations of political interference, resulting in currency devaluation several times over the last few decades. If the Yuan’s value is low against the dollar or the rupiah, it becomes cheaper for importers in Indonesia to purchase goods from exporters in China rather than turn to Indonesian manufacturers.
“Interventions like this are obviously undermining free and fair trade, but WTO doesn’t have specific rules against countries using their exchange rate as an export subsidy. The International Monetary Fund (IMF) does, but lacks power to enforce such rules,” says Presthus.
He also points out that China did a lot to support its producers during the pandemic, with lots of tax and fee cuts, which reduces overall costs for Chinese companies and allows them to sell their goods at a lower price. “It seems to me that this is a key reason for why Indonesian producers are struggling to compete.”