Meanwhile, the US is predominant within the G7. Its GDP PPP in 1990s reached 44 percent and 51.72 percent in 2022. The US economy has a significant influence on other developed countries such as South Korea, Japan and the EU. It is therefore no wonder that the US economy is often called the bedrock of the global economy. If it is in turmoil, the global economy will also be impacted. (FIGURE-1)
BRICS’ potential is also evident in its increasing share of global exports, which grew from 9.81 percent in 2003 to 20.7 percent in 2022, with China as the world’s largest exporter, controlling a market share of up to 15 percent of global goods exports. By contrast, the proportion of G7 exports has shrunk from 42.48 percent in 2003 to 28.21 percent in 2022, largely contributed by the US (28 percent).
For decades, China has succeeded in increasing its exports, thanks to various factors and strategies, including a competitive advantage with its cheap and productive workforce, investments in advanced technology and infrastructure, economies of scale derived from its vast domestic market, diversified manufacturing expertise, government’s export facilitation and its ability to build an integrated global supply chain. Not only that: the strong growth of its consumer market and diverse innovative products also play an important role in boosting its exports. Through close international cooperation, China has successfully positioned itself as a major player in global trade, creating a significant impact on the exponential growth of its exports. (FIGURE-2)
How about Indonesia?
Indonesia currently ranks 16th in global economic power as measured by the size of its GDP, with a proportion of 1.31 percent, a significant increase over the past decade. In 2008, Indonesia only accounted for 0.9 percent of global GDP. Since the beginning of the new Millennium, Indonesia has been recognized for its great economic potential due to its vast domestic market and population of 270 million people, stimulated by high household consumption which contributes more than 50 percent to its GDP. (FIGURE-3)
Indonesia’s economy has shown faster recovery from the impact of Covid-19 pandemic compared to other countries. In the second quarter of 2023, Indonesia managed to grow 5.17 percent YoY, a respectable rate among developing countries. By comparison in the same period, China and India posted respective GDP growth of 6.3 percent and 6.1 percent. The rates for Russia and Brazil were 4.9 percent and 4 percent, respectively.
On the other hand, G7 countries recorded lower economic growth. The US and Canada grew by 2.6 percent and 2.21 percent, respectively. The other members only managed to muster growth below 2 percent. All thus points to G7 risking a loss of its prodigious influence in the global economy.
Indonesia’s Imports from China
In establishing cooperation with other countries, trade policy is definitely a crucial component. China is the largest source of imports for Indonesia, accounting for 28.52 percent, followed by Singapore (8.17 percent) and Japan (7.23 percent). Meanwhile, the US proportion is only 4.92 percent.
The increased volume of imports from China has significant implications for Indonesia’s trade balance. Although it benefits the Indonesian consumer by providing a wide range of products needed by both consumers and industry at competitive prices, increased dependence on certain imported goods can pose a risk to economic stability, especially if Indonesia’s exports cannot keep up.