China orders state traders to stop buying American farm goods, threatening phase one trade deal
- Bloomberg reported China paused purchases of some American farm goods including soybeans as Beijing evaluates the ongoing tensions with the US over Hong Kong
- State-owned traders Cofco and Sinograin were ordered to suspend purchases, according to sources, throwing a new spanner in the works of the phase one deal
Chinese government officials told major state-run agricultural companies to pause purchases of some American farm goods including soybeans as Beijing evaluates the ongoing escalation of tensions with the US over Hong Kong, according to people familiar with the situation.
State-owned traders Cofco and Sinograin were ordered to suspend purchases, according to one of the people, who asked not to be identified discussing a private matter. Chinese buyers have also cancelled an unspecified number of US pork orders, one of the people said. Private companies haven’t been told to halt imports, according to one of the people.
Beijing’s move eroded the risk-on sentiment that had been prevailing over markets. S&P 500 Index futures gave up gains to trade 0.6 per cent lower, while US 10-year bonds erased declines. The onshore yuan reversed its advance, while soybean futures in Chicago, which had been as much as 1 per cent higher, were little changed.
Nobody from the commerce ministry responded to a fax seeking comment. Officials from Sinograin and Cofco also did not respond to calls.
Trump said the US would begin the process of stripping some of Hong Kong’s privileged trade status, without detailing how many changes would take effect and how many exemptions would apply. He also promised sanctions against Chinese and Hong Kong officials “directly or indirectly involved” in eroding Hong Kong’s autonomy, though stopped short of giving specifics.
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Equity investors had reacted positively to Trump’s remarks, as he did not provide any details or time-frame for what actions might come next. It’s unclear how soon the US would move on a range of options, from sanctioning Chinese officials to imposing tariffs on Hong Kong to attacking the territory’s financial stability.
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Still, as China started to gradually reopen its economy from the virus-led lockdown, it had increased its pace of imports, including a more-than 1 million ton cargo of American soybeans in just two weeks in May, and rare purchases of US soybean oil and ethanol.
But then tensions between the US and China began escalating, with Trump blaming the Asian nation for misleading the world about the scale and risk of the coronavirus outbreak. The fallout filtered through to the commodities markets, with China opting to buy Brazilian soy instead of American beans.