Chinese expect less trade with Indonesia

Chinese expect less trade with Indonesia

SANTIAGO (Reuters): Chinese businessmen are bracing for less trade with crisis-hit Indonesia, but are expecting to make up for the loss by increasing exports to Europe and Latin America, a business leader said Monday.

"The Chinese government expects overall trade volume with Indonesia, which is our biggest bilateral trade partner in the Southeast Asian economies, to fall severely in the latter half of this year and the beginning of next," Yu Xiaosong, the president of China's Chamber of International Commerce told Reuters.

Yu was speaking on the edge of a three-day meeting of the Pacific Basin Economic Council (PBEC), which opened here on Monday. The group is the private-sector equivalent of the Asia Pacific Economic Cooperation (APEC), the 18-nation intergovernmental group that bids to liberalize trade, investment and economic aid in the region.

Yu said the trade volume between the two countries dropped roughly 10 percent in 1998's first quarter, mainly due to the recent political unrest in Indonesia, and is seen falling more in the coming months.

China's exports to Indonesia are roughly $3 billion annually, or slightly over 1.0 percent of its total trade, Yu said.

"The Chinese government had been expressing concerns over the political and social stability in the region since last year," Yu said, explaining why he thought first-quarter results reflected the crisis in Indonesia.

Meanwhile, Chinese exports to Europe, Latin America and the Middle East have risen 15 percent in 1998's first quarter, Yu said. Europe accounts for 15 percent of all Chinese trade, while China's annual exports to countries such as Mexico, Brazil, Chile and Argentina are about $8 billion, Yu said.

Yu also said it would be difficult for China's economy to post a gross domestic product growth of 8 percent, as officially forecast, if the neighboring Asian nations continue suffering an economic crisis.

"We will have to adjust the expectations if another crisis erupts somewhere around us," he said.

Meanwhile, the economy in Hong Kong is expected to receive a relatively slight impact from the Indonesian upheaval in the short term, Mike Rowse, director at Hong Kong's Financial Secretary Office, said.

"We can probably hold out for two to three years given that the economies in our main trading partners, the United States and China, remain robust," Rowse said.

Rowse said direct impact will be limited, especially as Hong Kong banks had very little exposure to Indonesia.