Strengthening Economic Resilience through Fiscal Policy: Lessons from China, Reflections for Indonesia

As global trade headwinds intensify, Indonesia must closely examine how other major economies are responding—not to imitate, but to adapt and innovate within our own national context. China’s approach to cushioning trade shocks through fiscal policy offers important insights, particularly as Indonesia seeks to future-proof its economy amidst shifting geopolitical and economic tides.

Navigating Trade Shocks: China’s Fiscal Toolkit

China, facing renewed trade tensions and slowing global demand, has turned to proactive fiscal policy to stabilize its economy. The Asian Macroeconomic Research Office (AMRO) recently highlighted how Beijing is leveraging public spending to offset trade disruptions—through increased budget deficits, expanded bond issuance, and coordinated central-local fiscal programs.

Key measures include:

• Direct support to households and small businesses, particularly those most affected by global demand contraction.
• Consumption incentives such as digital vouchers and subsidies to stimulate domestic demand.
• Social safety net enhancements to protect vulnerable populations.
• Central-local coordination in financing and execution, ensuring fiscal transfers are timely and impactful.

This multifaceted strategy reflects China’s broader push toward “dual circulation”—an economic model emphasizing self-reliant domestic growth while remaining open to global markets.

Indonesia’s Fiscal Foundations for Resilience

Indonesia, too, is no stranger to global shocks—from the COVID-19 pandemic to the volatility of commodity prices and ongoing geopolitical frictions. What has helped us endure—and must continue to guide us—is a combination of prudent fiscal management, targeted social assistance, and productive public investment.

Indonesia can learn from China’s experience, not by duplicating policies, but by reinforcing our own strategic priorities:

1. Strengthening Consumption through Social Protection

Our Bantuan Langsung Tunai (BLT) and Kartu Prakerja programs during the pandemic proved how timely cash transfers and upskilling initiatives can preserve purchasing power and support recovery. As global uncertainty persists, such programs must remain responsive and agile.

2. Empowering MSMEs as Domestic Growth Anchors

The heart of Indonesia’s economy lies in our 64 million MSMEs, many of which are export-dependent or vulnerable to input cost fluctuations. Expanding access to financing, digital tools, and green transformation incentives will buffer them from external demand shocks while preparing them for long-term sustainability.

3. Smart Public Spending and Fiscal Transfers

China’s use of special bonds to finance local infrastructure can inspire better fiscal decentralization in Indonesia. We must ensure that Dana Alokasi Khusus (DAK) and Dana Desa are not just disbursed, but translated into productivity-enhancing projects—especially in tourism, agriculture, and renewable energy.

4. Investing in Food and Energy Security

As global trade becomes more unpredictable, Indonesia must double down on domestic supply chain resilience—supporting farmers, fishermen, and rural producers through fiscal instruments that enhance production, logistics, and market access.

Toward a Fiscal Strategy That Reflects Our National Character

Indonesia’s fiscal strategy must reflect our values: gotong royong, justice, and resilience. Unlike centralized systems, our strength lies in community-based approaches—where fiscal policy becomes a vehicle for empowering regions, protecting the poor, and enabling self-reliance.

In my role across business chambers and as a former member of KEIN, I’ve witnessed firsthand how fiscal policy, when guided by data, community feedback, and long-term vision, can uplift both growth and equity. Now is the time to refine our tools—not only to respond to global shocks but to seize the moment to consolidate value, drive inclusive investment, and build a resilient Indonesia.