China Increases Key Purchases With U.S. Target Still Far Off
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China increased its purchases of U.S. goods in recent months, and with signs that soybean purchases may also rise as the election nears, that may be enough to salvage the trade deal even if it won’t reach what it promised.
China’s very unlikely to be able to import what was agreed in the January deal, even if it considerably sped up the size of purchases. By the end of of July, China had bought just 28.1% of the target for 2020 of more than $171 billion in U.S. goods, according to Bloomberg calculations based on Chinese Customs Administration data.
However, falling short of the top-line number might not be seen as a deal-breaker. China isset to purchase a record amount of soybeans this year, according to people familiar with the matter, and is already placing largeorders for soybeans and corn.
Resolving the trade war between the U.S. and China has emerged as a rare area of cooperation as the relationship sours on a number of other fronts, and the Trump administration seems to want to put a positive spin on what China is doing.
Read more:U.S., China Signal Progress on Trade Deal as Relations Fray
Larry Kudlow, the chief economic adviser to President Donald Trump, said Aug. 20 that China is sticking to its commitments in the deal.
“They’re doing basically what they should be doing — they’re buying a ton of commodities, particularly agriculture commodities,” he told Fox Business. “It’s probably the best since we’ve seen in at least a half a dozen years.”
And in a meeting this week, senior officials on both sidesreaffirmed their commitment to the deal, with China’s purchases so far called “significant” by the U.S.
“The parties also discussed the significant increases in purchases of U.S. products by China as well as future actions needed to implement the agreement,” the U.S. Trade Representative said in a statement on Tuesday morning, Beijing time.
The two sides have “smooth” communications on agriculture and finance in the meeting, which had “a good atmosphere,” according toTaoran Notes, a blog affiliated with the Economic Daily. That newspaper is Chinese state media and the blog was seen as an authoritative commentator on the trade talks in 2019.
China will have an easier time catching up on agricultural purchases than on energy, where demand is down and oil and gas can be bought from many other countries because it trades on a world market, said William Reinsch, a former Commerce Department official in the Clinton administration who is now a senior adviser at the Center for Strategic and International Studies.
“The Chinese have historically bought a very large amount of agriculture products from the U.S. in the fourth calendar quarter,” he said. “That’s when the fall crops come in, and they do a lot of buying then.”
Click for full breakdown of China’s purchases to end-July
There was a big increase in energy imports in July from June, with a surge in China’s imports of U.S. crude oil pushing purchases of energy products to over 10% of the target. That trend looks set to continue, with U.S. oil exports to China set to reach arecord in September.
Purchase of agricultural products increased, with cotton rising and cereals at the same high-level seen in June. China made its biggest-ever purchase ofU.S. corn in July, with cargoes set to arrive at Chinese ports in coming months.
There was a slump in soybean buys last month, which was partly due to seasonal factors. That is likely to reverse as the U.S. harvest picks up.
Imports of manufactured goods reached about a third of 2020’s target by the end of the first seven months, with more than $1 billion in purchases of integrated circuits, and strong shipments of electrical equipment and machinery.
“As long as there is significant progress, that’s fine,” says Iris Pang, greater China chief economist at ING Bank NV. Because of Covid, everyone understands that it is difficult to fulfill 100% of the promises, and farmers care more about whether their products can be sold to China, she said.
— With assistance by Molly Dai, Miao Han, and Eric Martin
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