Last Monday, China asked its state-owned companies to suspend purchases of US farm goods including soybeans and pork. This move raises concerns that China will not live up to the US-China trade agreement signed last January, in which China agreed to increase its purchases of U.S. agriculture products by $32 billion relative to 2017 levels. This decision was made in response to President Trump’s announcement that he would remove Hong Kong’s special status with the US.
Another potential reason for the decision is China’s attempt to revive its economy after the pandemic. Demand has been weakened and activities like dining out have declined significantly, which has now created less of a need for imported goods than there was last January.
Arlan Suderman, chief commodities economist for INTL FCStone has tweeted, “News stories out that China told its buyers to stop buying U.S. pork & beans. Just got off the phone with our office there. They expect that to be temporary. Supplies are adequate near-term due to current shipments, giving China freedom to threaten. #oatt #soybeans #pork”
One mis-perception about China’s economy is that it is overwhelmingly dominated by state-owned companies, when in today’s China, 60 percent of its GDP comes from privately owned companies, making the government’s request to its state-owned companies less of a threat than it might have been in the past.