The Indonesia-China cooperation has taken a significant step forward as both countries agreed to strengthen the use of local currencies in trade and investment. During Chinese Premier Li Qiang’s recent visit to Jakarta, the two nations signed a new agreement to promote Local Currency Transactions (LCT). This initiative aims to reduce dependence on the US Dollar, boost financial sovereignty, and deepen economic ties.
Indonesia-China Cooperation Strengthens Bilateral Ties
The visit marked an important milestone in the strategic partnership between Indonesia and China. The two leaders signed 12 Memorandums of Understanding (MoUs) across key sectors such as economy, health, tourism, education, and media. These agreements pave the way for expanded cooperation.
President Prabowo Subianto expressed optimism about the collaboration, stating, “We are optimistic that this cooperation will bring benefits to both nations and our peoples. But more importantly, we believe it will bring peace throughout the Southeast Asia region and even the Asia Pacific.”
Premier Li Qiang also conveyed goodwill, saying, “Going forward, China is ready to join hands with Indonesia to strengthen bilateral cooperation, to succeed together on our path to modernization, and to welcome a brilliant future together.”
Local Currency Transaction (LCT) Agreement Marks a Financial Shift
A key highlight of the visit was the agreement between Bank Indonesia and the People’s Bank of China to promote the use of local currencies through the LCT framework. This agreement allows transactions using the Indonesian rupiah and Chinese yuan directly, bypassing the US Dollar in cross-border trade and investment.
This shift aligns with a regional trend aimed at reducing reliance on the US Dollar and minimizing currency exchange risks. The LCT framework will cut transaction costs and support long-term financial stability by deepening cooperation between the two central banks.
Reducing USD Dependency Through Regional Financial Strategy
Indonesia’s commitment to reducing its dependence on the US Dollar is clear. The LCT agreement supports a broader strategy of de-dollarization, which aims to shield both countries from global currency volatility and financial shocks.
President Prabowo emphasized Indonesia’s readiness to promote regional peace and stability, saying, “Indonesia is ready to create a safe and prosperous region. Indonesia is ready to strengthen cooperation with China so that together we can create a peaceful region, safe for all.” He also welcomed the security cooperation between Indonesia’s Bakamla and the China Coast Guard, noting, “This MoU will enhance cooperation in capacity development, information sharing, and maritime safety.”
During the meeting, Premier Li expressed his gratitude towards Prabowo, stating, “Honorable President Prabowo, I am very pleased to make an official visit to Indonesia at your invitation, on the occasion of the 75th anniversary of diplomatic relations between China and Indonesia.”
Sectoral Cooperation Benefits from Strengthened Financial Ties
The partnership extends to various sectors poised to benefit from smoother financial transactions under the LCT framework. Indonesia is set to increase durian exports to China, expanding agricultural trade under improved payment terms.
In health, the countries will work together on tuberculosis control and the development of traditional Chinese medicine in Indonesia. Tourism cooperation will also be strengthened with joint promotional efforts and technical exchanges.
These sectoral initiatives will gain momentum as the LCT agreement facilitates easier, faster, and more cost-effective currency exchanges, boosting bilateral trade and investment flows.
A New Era for Indonesia-China Cooperation
Indonesia-China cooperation has entered a new era with the Local Currency Transaction framework leading the way. This financial mechanism represents a concrete step toward reducing USD dependency and boosting regional economic resilience.
By expanding the use of local currencies and decreasing reliance on the US Dollar, both countries are setting a strong example of how strategic diplomacy can lead to transformative policies and sustainable regional integration.
Source: news.detik.com, money.kompas.com
Image: Getty Images
