Bilateral Trade Between China And Indonesia:A Gravity Model Approach

This dissertation applies a gravity model theory in order to analyze bilateral trade flows between China and Indonesia.This study uses panel data on international trade of China with its top 35 trading partners,including Indonesia.The data was taken from World Bank and National Bureau of Statistic of China from period 2010-2015.The main results of this study present that bilateral trade flows are affected by China's GDP,GDP of partner countries,distance and free trade agreements as a qualitative variable.Meanwhile,common language does not show its effect to the trade flows due to the countries which have no ability to communicate with Chinese language they still can communicate with English as a global language.Furthermore,the results will be specified to bring conclusion and recommendations at increasing trade volume between China and Indonesia then the nation's economic development growth.According to the gravity model standpoint that China and Indonesia still have more trade potential that could be explored in order to increase trade value between two countries.Several factors or variables affecting trade also could be included as a consideration in order to maintain and develop trade relationship between two countries in the future.