The phase one trade deal with China has faded from headlines just a bit with coronavirus gripping the world, but the importance of China following through on the Phase One trade deal’s purchase requirements remains vital to U.S. agriculture and other industries. So, there is real concern when news emerges that China may want to step back from that deal in favor of one more friendly to itself.
Last Monday a China state newspaper story said just that, and economist Arlan Suderman with INTL FCStone says it is further evidence of differing camps within the Chinese Communist party.
“One wanting a little bit more reform and a better trade relationship with the United States, and another is more hard core. I think the calls for redoing the trade deal come from the more hard core. They had the heavier hand a year ago when the trade talks kind of fell apart. Then President Xi Jinping, who tends to lean more toward the reform side, kind of got the upper hand toward the end of last year, and we had the phase one deal signed January 15th. But this battle is still going on, particularly aggravated by the tensions over coronavirus.”
Follow-through purchases as a result of Phase One have been positive public relations for China in the face of backlash against Beijing over their handling of coronavirus. Suderman says it remains an incentive for them to stick with the deal.
“The other factor that may play into this is there is tremendous fear in China, based on their experience with coronavirus, that we will see the world suppliers shutdown in the weeks and months ahead because of our battle with coronavirus. There are stories running in China almost daily that talk about fears that our ports and other exporters’ ports shutting down and them not being able to get the supplies they need and having food shortages.”
He says Chinese buyers are hoarding supplies leading to aggressive buying of pork, active buying of soybeans, and even some purchases of corn and other commodities from the U.S. and elsewhere. Suderman believes that fear is unfounded, but it is helping President Xi with continuing imports, against the wishes of the hardliners.