News that Beijing has ordered state firms to halt purchases of farm products could well be an opportunistic political maneuver stemming from fundamental weakness on the demand side in China, said analysts.
On Monday, Reuters reported that China has asked main state firms to suspend large-scale purchases of major U.S. farm products like soybeans and pork. That came in response to President Donald Trump, who said last week he would strip Hong Kong of its special status with the U.S.
But soybean demand has not been strong in China anyway.
“Partly, it’s because of the virus outbreak (that) actually impaired the logistic arrangements between China and the U.S., and also after the virus outbreak, what we see is that the domestic demand in China is actually collapsing,” said Hao Hong, head of research and chief strategist at the Bank of Communications.
Even though the economy is gradually recovering in China, people are just not spending and dining out as much as before, which helps account for the lower need for soybeans — typically used in animal feed.
“With logistic concerns and also with collapsing domestic demand, it’s not difficult to see how China would require less of the soybean input,” Hong told CNBC on Tuesday.
In April, China’s imports of U.S. goods slumped 11.1% in dollar terms from a year ago.
According to Reuters, Chinese importers have also canceled shipments of American pork and suspended state purchases of bulk volumes of U.S. corn and cotton as well. China is the world’s largest pork consumer and importer.
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