China cannot comply with its trade agreement

China cannot comply with its trade agreement
China cannot comply with its trade agreement

Analysts said Beijing ordered state-owned companies to stop purchasing agricultural products, which could be an opportunistic political move stemming from basic weakness based on demand in China.

On Monday, Reuters reported that China has asked major state firms to suspend large-scale purchases of America's top agricultural products, such as soy and pork. That was in response to President Donald Trump, who said last week that he would bring Hong Kong to its special position with the US. America

But demand for soy in China has not been strong anyway.

"Partly, this is due to the virus outbreak (which) actually damages the logistics system between China and the US. And even after the virus outbreak, what we see is that domestic demand in China is actually collapsing. Is. ”Said Hao Hong, head of research and chief strategist at Communications Bank.

Despite the fact that the economy in China is slowly recovering, people simply do not spend as much and eat as before, which helps explain the reduced need for soy, which is commonly used in animal feeds goes.

"With logistic concerns and the collapse of domestic demand, it is not even difficult to see how China would be less in need of soy contribution," Hong told CNBC on Tuesday.

In April, Chinese imports of US goods fell 11.1% in the dollar from a year earlier.

According to Reuters, Chinese importers have also canceled shipments of US pork and suspended state purchases of bulk versions of US corn and cotton. China is the world's largest consumer and importer of pork.

Last week, China reported an outbreak of African swine fever in the Northwest Province. Swine fever outbreaks have destroyed China's pig herds and outbreaks of coronovirus have already affected demand for soy feed.

Commodity economist Arlan Suderman of INTL FCStone said in a tweet on Monday that the suspension could be temporary.

"Supply is insufficient in the short term due to current shipments, allowing China the freedom to threaten," Suderman said.

Hong of Bokom said that he would not be surprised to see the demand for sugar soy if he boosts the V-shaped recovery in the economy.

After all, the United States is a major exporter and major source of soy imports from China, and China is the world's largest soy importer.

Under a phase of trade the United States and China signed in January, China promised an additional $ 32 billion in purchases of US agricultural products relative to 2017 levels over the next two years.

Rural constituents are an important part of Trump's voter base.

Chinese state-owned companies already bought at least three weights of American soybeans on Monday, Reuters reported.

According to the US Department of Agriculture. In its World Agricultural Supply and Demand Estimates report released in May, the US exports of soybean are projected to be 1.675 billion bushels in the 2019-2020 business year, a 4.2% decrease from the previous year. .

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