Indonesia’s Strategic Choices Of Internationalization SMEs Under The Framework Of ASEAN-China Free Trade Area

This research describes the economic relations between China and Indonesia. Especially about the agreement between China and Indonesia in ASEAN to create a special economic zone (Free Trade Zone) between that countries in ASEAN-China free Trade Area (ACFTA). Motivation and interest of China and ASEAN (include Indonesia) deal to create special economic Free Trade Zone also describes about the policy of China and ASEAN to increase and improve their economy. This paper focuses on CAFTA implementation effect to the industry of Cibaduyut’s leather shoes, caused by China’s imitation leather which is imported to Indonesia’s domestic market. Most of Small Medium Enterprises (SMEs) worried after government implementing the Asia China Free Trade Area (ACFTA). This agreement pushed down the import tariff from five percent to zero percent. China’s products and local product compete in market without government protection. China’s products will dominate market share due to the lowness of local products competitiveness. Government should reorient the SMEs development policy to minimize negative impact of ACFTA. It can be done by supporting local potential commodities, revitalizing capital loan policy, and synergy between government and others stakeholders to develop SMEs.