Abstract
This research determines the effect of the ASEAN-China Free Trade Agreement (ACFTA) on the palm oil trade between China and Indonesia. This study discusses the analysis of the ACFTA and the effects on the economies of China and Indonesia. This research was analyzed using the gravity model and the analysis of the unit root test, lag selection criteria, co-integration, vector error correction model (VECM), long-run analysis test, short-run analysis test, and granger causality test using Eviews 8. The dependent variable used is palm oil export and independent variables include are Gross Domestic Product (GDP), Real Exchange Rate (RER), Foreign Direct Investment (FDI) and dummy variable (ACFTA) for both countries using data of 28 years (1990-2017). The case of China, the results shows that there is a long-run relationship between palm oil export with GDP, RER, FDI, and ACFTA and the palm oil export has a short-run relationship with GDP, FDI, and ACFTA, and palm oil export is showing causality with GDP, RER, FDI, ACFTA. Meanwhile, in the case of Indonesia, there is no long-run relationship between palm oil export with GDP, RER, FDI, and ACFTA but there is has a short-run relationship between palm oil export with GDP and palm oil export is showing causality with GDP, RER, and FDI. The implementation of ACFTA on palm oil trade between China and Indonesia have positive impacts on both countries and increase bilateral trade flows. Keywords: China, Indonesia, ACFTA, Palm oil, Gravity model. DOI: 10.7176/JCSD/58-04 Publication date: April 30 th 2020
Highlights
Indonesia enhanced diplomatic relations with China in 1990, and the amount of trade between both countries had risen considerably after five years
The existence of the ASEAN-China Free Trade Agreement (ACFTA) for Indonesia has a significant influence on Indonesia's palm oil exports to China
These results indicate that there is a difference in the value of Indonesia's palm oil exports to China after the implementation of ACFTA
Summary
Indonesia enhanced diplomatic relations with China in 1990, and the amount of trade between both countries had risen considerably after five years. Since 1991, trade relations between China and ASEAN members have been formed, and the inter-state economy has been developing for decades. The ASEAN economy has been active in the trade agreements such as the ASEAN-China Free Trade Agreement (ACFTA) over the past two decades, the purpose establishing of ACFTA is to create free trade by reducing and removing barriers, tariff of trade, increasing market, investment services, and ASEAN and China have increased their economic cooperation (Dianniar, 2013). The free trade agreement aims to dispose of some of the products, reduce the tariffs, and eliminate trade barriers between trade partners, China and ASEAN were eliminate their problems through
Sign-in/Register to view highlights & summary Sign-in/Register to access full text options 
Free) 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call
