This article is co-authored by Yeta Purnama, a researcher at the Center of Economic and Law Studies (CELIOS), and Muhammad Zulfikar Rakhmat, Director of the China-Indonesia Desk at CELIOS.
Chinese ceramics have long been a cornerstone of the intricate relationship between China and Indonesia, spanning a millennia of cultural exchange and economic ties. As a nation that has been crafting ceramics since 2,500 BC, China has been exporting its traditional motifs and folk tales all over the world through the material.
However, in recent years, the rapid growth of Chinese ceramic tile imports has posed unique challenges for Indonesia’s domestic ceramic industry. If left unchecked, it could spark potential tensions between the two countries.
One problem is when Chinese ceramic imports enter the Indonesian market at prices up to 100% cheaper than locally produced ceramics. While Indonesia charges between $4 and $5 per square meter of ceramics, for instance, Chinese products are priced at just $2.3 to $2.7 per square meter.
Illegal imports of Chinese ceramics are also another challenge. Recently, the Ministry of Trade had to destroy 4.57 million units of illegal tableware ceramics worth nearly $5,000. The products either lacked proper labeling or had expired Indonesian National Standard (SNI) marks.
Non-compliant tableware ceramics can contain dangerous metals like lead and cadmium, which pose health risks when they leach into food and beverages. In 2018, China reduced the thickness of its ceramic products from 9.5 – 10 mm to 7.2 – 8 mm to reduce production costs, affecting the quality of products.
From Cultural Exchange to Diplomatic Challenge
Historically, Chinese motifs were introduced to Indonesia through ceramics and jars traded by Chinese merchants. Over time, these artifacts were also brought by Chinese migrants who settled in Indonesia, leading to cultural blending evident in various aspects of Indonesian life, including clothing and cuisine.
Ceramics served not just as commodities but also as diplomatic gifts exchanged between the kingdoms of China and the Indonesian archipelago, serving deeper political ties. As centuries passed, the art of ceramic production evolved, especially with the advent of porcelain—a durable material crafted from kaolin and petuntse. Porcelain soon joined silk, tea, and spices as a significant export commodity from China.
Today, ceramic production in China is suffering from overcapacity. This has prompted countries in Europe and the U.S. to impose restrictions on Chinese ceramics to protect their own industries. Other ASEAN countries, like the Philippines and Vietnam, have managed to maintain competitive pricing by aligning their import tariffs more closely with domestic prices.
Meanwhile, Indonesia has struggled to effectively curb the influx of Chinese ceramics, allowing China to capitalize on the country’s market dynamics. Throughout 2023, Chinese ceramics flooded the Indonesian market. The situation was exacerbated by economic hurdles, such as declining purchasing power due to rising fuel prices.
This condition has persisted over the years, recurring annually in 2018, 2021, 2022, 2023, and 2024. Edy Suyanto, chairman of the Indonesian Ceramic Industry Association (ASAKI), has urged the government to protect the local ceramic market from unfair trade practices and predatory pricing by China.
The Ministry of Finance has imposed safeguard measures, including the establishment of import quotas, increased import duties, and a combination of the two to protect the domestic ceramics industry. However, domestic ceramic issues have persistently unfolded, proving that the government’s safeguards are ineffective.
The Chinese government offers a 14% tax refund to every exporting Chinese company. This policy has facilitated the smoother entry of commodities like ceramics into the Indonesian market.
In turn, it has forced Indonesian sellers to set prices well below average to remain competitive and cut production costs, all while trying to retain workers. Consequently, Indonesia has suffered significant financial losses, evident in reduced profits, lower domestic prices, decreased factory utilization, and diminished returns on business investments. The deficit in ceramic import-export transactions in the past five years has reached $1.3 billion.
This economic strain underscores a direct link between Chinese producers’ dumping practices and the financial losses incurred by Indonesian producers. Cheap imports from China flood the market, reducing sales volumes and exerting downward pressure on prices. This further undermines the competitiveness of Indonesian products and diminishes revenue for local businesses.
As Indonesian authorities contemplate protective measures such as tariffs as high as 200%, local businesses are pressing for swift government action to mitigate these adverse impacts.
Our Recommendation
The Indonesian government must urgently bolster support for the local ceramic industry.
Ariawan Gunadi, an expert in business law and international trade, emphasized that strategic measures are crucial to fortifying the domestic ceramic sector and enhancing protection. Indonesia’s robust domestic ceramic production capabilities should ideally fulfill all national ceramic demands without the need for excessive imports.
Drawing from successful models such as the European Union’s stringent anti-dumping policies, Indonesia could consider implementing similar duties to curb imports. Alternatively, Indonesia could also learn from Vietnam and the Philippines, where local product prices are aligned closely with imported ones.
Furthermore, Ariawan underscores the importance of regulatory reinforcement through the Indonesian National Standard (SNI). By enforcing these standards rigorously, Indonesia can ensure fairness and high-quality imported products from China.
While implementing import tariffs could potentially curb excessive Chinese ceramic imports, a cautious approach is needed. Rather than immediately imposing tariffs as high as 200%, the government should conduct thorough assessments to balance market needs and standards compliance.
Additionally, proactive management of economic relations with China and Indonesia is essential to foster constructive cooperation and maintain diplomatic ties.
Another viable strategy is a balanced increase in safeguard percentages grounded in comprehensive calculations. This approach aims to provide adequate protection without imposing excessively high tariffs that could have detrimental economic repercussions for either party involved.
