JAKARTA - China plans to buy about US$1.5 billion (S$2 billion) of coal from Indonesia after agreeing to a new three-year supply pact, a move that has the potential to further weaken trade ties with rival supplier Australia.

Indonesia will seek to raise coal exports to China from 2021 and aims to attract investment in the development of processing technology, according to the Indonesian Coal Mining Association, which on Wednesday signed a memorandum of understanding with the China Coal Transportation and Distribution Association.

Further discussions will take place over export volumes, according to the Indonesian association's statement.

The value of Indonesia's coal exports to China fell to US$4.9 billion between January and September on weaker demand, from US$5.8 billion in the same period in 2019, according to the statement.

The deal comes as relations between China and Australia deteriorate. China has blacklisted a range of Australian commodities as a diplomatic spat between Beijing and Canberra worsens.

Tensions between the two trading partners have intensified since Huawei Technologies was barred from building Australia's 5G network in 2018.

Chinese power stations and steel mills were told to stop using Australian coal and ports were instructed not to offload the fuel, Bloomberg News reported in October.

In another move that will unnerve Australian exporters, China will impose anti-dumping duties of more than 100 per cent on Australian wine from this weekend, the latest sign of deteriorating trade tensions between the two nations.