China, US reach consensus on several key trade issues

China has made its first major purchases of US soybeans since President Trump and his Chinese counterpart Xi Jinping struck a trade war truce earlier this month, providing some relief to US farmers who have struggled to find buyers for their harvest.
American soya bean farmers are now faced with the problems of low prices, no buyers for their crop, high storage costs and a short storage life of the beans. The reported soya bean purchases and tariff cuts to US automobiles as well as news that Chin
American soya bean farmers are now faced with the problems of low prices, no buyers for their crop, high storage costs and a short storage life of the beans. The reported soya bean purchases and tariff cuts to US automobiles as well as news that China is mulling over delaying its ambitious Made in China 2025 plan by a decade are being seen as concessions by Beijing to ease trade tensions with Washington.PHOTO: REUTERS

Beijing is said to have reduced tariffs on American cars and resumed imports of soya beans

China's Commerce Ministry spokesman said yesterday that both China and the United States had reached consensus on trade dispute issues covering agricul-tural products, energy and automobiles, but did not furnish details on any concessions.

"Specific details will be announced," Mr Gao Feng told a weekly press briefing when asked to confirm reports that China was cutting tariffs on US cars to 15 per cent from 40 per cent, and resuming imports of US soya beans.

Reuters reported on Wednesday that Chinese state-owned enterprises bought more than 1.5 million tonnes of soya beans worth over US$500 million (S$685 million) from American farmers, the first significant purchase by China since both sides recently declared a 90-day truce in their trade conflict.

Mr Gao told reporters that soya beans had always been an important item in China's import of US agricultural products. "We have a huge domestic market demand," he said, but declined to offer more details.

The reported soya bean purchases and tariff cuts to US automobiles as well as news that China is mulling over delaying its ambitious Made In China 2025 plan by a decade are being seen as concessions by Beijing to ease trade tensions with Washington.

Mr Gao also told the briefing yesterday that both sides were in close contact over the trade issue, adding that China welcomed any US trade delegation to visit the country while keeping an "open attitude" about a Chinese delegation visiting the US for trade talks.

  • 1.5m

    Amount in tonnes of soya beans - worth over $685 million - which Chinese state-owned enterprises reportedly bought from US farmers, the first significant purchase by China since both sides declared a 90-day truce in their trade conflict. 

Analysts told The Straits Times the latest developments signalled that Beijing was keen on reaching a deal by the 90-day deadline.

"It is very clear that China doesn't want the trade war to continue," said Dr Shen Jianguang, chief economist of JD Digit, a digital and finance arm of e-commerce giant JD.com. "China is making moves on much of what the US wants. It looks very likely that both sides will reach a deal in 90 days."

Dr Mei Xinyu, a researcher at a Chinese Commerce Ministry think-tank, noted that the US has been wanting China to increase its purchases of US energy and agricultural products for about six or seven years.

He said it is not surprising that China is willing to resume cooperation in these areas after President Xi Jinping and his US counterpart, Mr Donald Trump, reached consensus when they met on the sidelines of the Group of 20 summit in Argentina earlier this month.

Dr Mei also said the resumption of imports of US soya beans came about because a Chinese goal in the trade dispute had already been met and, on top of this, the move will benefit China in the near term.

He noted that the export prices of the US commodity had dropped steadily since China stopped imports and imposed an additional 25 per cent tariff on it. "It shows that our tit-for-tat actions have achieved their intended effects."

American soya bean farmers are now faced with the problems of low prices, no buyers for their crop, high storage costs and a short storage life of the beans.

"If we let such large supplies of soya beans rot and prices shoot up next year, what good would it do us? So, we can start buying some at the current cheap prices. This can also help prevent the sudden surge of soya bean prices in the first and second quarter of next year," Dr Mei said.

"You have to understand the Chinese wisdom in all of these. This applies to all the other measures that you are seeing. You can't see this as China admitting defeat," he said.

Dr Shen also noted that China's eagerness to reach a deal with the US should not be seen as a bid to bolster its slowing economy.

The trade war is not the only factor dragging down the Chinese economy. Domestically, the government has been overzealous in its deleveraging measures, causing a severe credit crunch, said Dr Shen.

Economists have estimated that growth of the world's second-largest economy will slow to 6.2 per cent next year from 6.6 per cent this year.

Dr Shen predicts that a key annual economic policy meeting next week will likely discuss setting a lower economic target of between 6 per cent and 6.5 per cent for next year.

Bloomberg reported that the Central Economic Work Conference will take place from Dec 19 to 21.

"Policymakers will likely pledge more support for the private sector with fiscal easing and further opening up of domestic markets, and possibly set aside fiscal reserves and additional policy tools," Morgan Stanley economist Robin Xing told Bloomberg.

Dr Shen expects the current deleveraging measures to taper off, with an easing in monetary policy.

"And there might be bold moves to cut taxes massively, just like what US President Donald Trump has done," he added.

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A version of this article appeared in the print edition of The Straits Times on December 14, 2018, with the headline 'China, US reach consensus on several key trade issues'. Print Edition | Subscribe