China, Indonesia plan increased agriculture trade amid state visit

Indonesia’s president Widodo visited Beijing on Tuesday to meet with Chinese President Xi and discuss increasing cooperation and trade flows in areas like agriculture. As part of the meeting, Indonesia said China committed to buying 1 million tons of crude palm oil from the country.

In 2021, Indonesia was the largest supplier of palm oil to China, exporting 3.6 million tons which represented 78% of China’s total imports.

Trade flow in other areas has continued to grow as China seeks to diversify its sources of food imports.

Indonesian exports of aquaculture products to China rose from $71.1m USD in 2010 to $579m USD in 2020. Exports of vegetables, fruits, and nuts grew from $109m USD to $316m USD over the same period.

Despite the growth in other areas, palm oil remains the dominant export accounting for 51% of the value of agricultural exports to China in 2020.

Market reaction to the announcement was muted as Dalian palm oil futures continue to trade within narrow range following their 40% decline from early June to mid-July.

Also on the international relations front, there are increasing rumors that US House Speaker Pelosi is considering an official trip to Taiwan in August, a move China’s Foreign Ministry said would draw “resolute and forceful measures” if it were to happen.

Diplomatic tensions between the two countries remain at a low point, but trade has mostly normalized following the trade war and subsequent phase one deal.

An official visit of a high-ranking US official to Taiwan would likely draw backlash from Beijing and could have the potential to disrupt trade flows in retaliation.