With bilateral trade projected to hit USD160B in 2025, Indonesia’s Yuan-Rupiah pact with China for de-dollarisation and reshapes ASEAN’s financial future.

JAKARTA, INDONESIA  - 5 June 2025 - As one of China's largest ASEAN trading partners, with bilateral commerce reaching USD147.80 billion in 2024 (6.1% YoY growth), Indonesia has solidified its economic ties with China.

During Chinese Premier Li Qiang's state visit ahead of the ASEAN-GCC-China Summit, the two nations signed four new MoUs - most critically, an upgraded Local Currency Settlement (LCS) pact between Bank Indonesia (BI) and the People's Bank of China (PBOC). EBC Financial Group (EBC), a leading brokerage firm, examines how this agreement redefines Indonesia's economic resilience.

Indonesia cements its position as China's top ASEAN partner with USD147.8B bilateral trade in 2024, strengthened by a historic Yuan-Rupiah currency pact.

Sectoral Wins: The Foundation for Deeper Ties

The accords support Indonesia's LCS framework across key sectors. Trade and tourism will benefit from streamlined visa policies, targeting 2 million Chinese visitors in 2025. A USD5 billion commitment for twin industrial parks (Fujian-Batang SEZ) will create over 100,000 jobs. Soft power initiatives, like joint TB vaccine research and media collaboration, strengthen people-to-people ties.

The LCS Breakthrough: Financial Sovereignty in Action

The BI-PBOC agreement enables Rupiah-Yuan use in capital accounts, offering three advantages:

Trade Shield: Bilateral trade (USD147.80B in 2024, +6.1% YoY) avoids costly USD conversions for exports like palm oil and nickel.

Rate Cut Buffer: BI gains flexibility with 5.3% of reserves in yuan, easing policy without destabilising the Rupiah.

BRICS Leverage: Access to New Development Bank funding supports President Prabowo's USD20B infrastructure agenda, reducing dollar reliance.

"This isn't just about cutting transaction fees-it's a recalibration of Indonesia's financial DNA," says David Barrett, CEO of EBC Financial Group (UK) Ltd. "By enabling Yuan-backed trade and investment flows, BI is building a hedge against Fed policy shocks."

ASEAN's New Template: Unity Amid Global Realignments

China-ASEAN trade hit USD330B (Jan-Apr 2025, +9.2% YoY), with Indonesia leading regional integration. The upgraded CAFTA 3.0 and ASEAN-GCC-China Summit highlight diversified economic partnerships. As Barrett notes, "Indonesia is crafting a blueprint for monetary diversification. The Local Currency Settlement (LCS) deal illustrates how mid-sized economies can reduce overreliance on a single dominant currency, balancing regional cohesion with global standards."

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