Look to Eurasia, China tells grain traders as tariffs on US soybean kick in

China is encouraging its grain traders to look to Eurasia to diversify sources of major agricultural products as the country trades tariffs with the United States.

Zhang Wufeng, head of the agency managing China’s grain stockpiles, said on Friday that the government would support infrastructure projects to help Chinese grain companies expand trade along the route of the “Belt and Road Initiative”, Beijing’s push to link economies into a China-centred trading network, state-run Xinhua reported.

Zhang made the offer at a belt and road grain security meeting in Lanzhou, Gansu province, just hours before the world’s two biggest economies officially entered a trade war by imposing 25 per cent tariffs on US$34 billion worth of each other’s goods.

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The US duties are focused on Chinese industrial goods while Beijing’s tariff list mainly targets food imports such as soybean, sorghum, corn and wheat. Additional tariffs and potentially longer customs checks on imported grain means that China needs to find alternative sources to meet increasing domestic demand.

Gansu province, neighbouring Mongolia to the north and close to China’s western border, was building a grain corridor connecting central Asia and western Europe, the report said.

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The project includes construction of a 160 million yuan (US$24 million) customs port for imported grain in Lanzhou New Area, a state-level economic development zone, as well as five logistics parks for grain.

At the Friday forum, the State Grain and Reserves Administration signed an agreement with the Gansu government to improve logistics for grain and organise more trade fairs and forums on agricultural products.

A day earlier, Gansu’s grain industry association also signed deals with grain producers in Azerbaijan and Belarus.

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But there are barriers to diversifying sources of major agricultural products such as soybean.

China imports nearly 100 million tonnes of soybeans a year, accounting for about 60 per cent of the world’s market. Last year roughly half of those imports came from Brazil and a third from the US, with suppliers in places like Russia, Ukraine and Kazakhstan together contributing less than 1 per cent of the total.

China has already imported less soybean from the US since the start of the trade row, turning to Brazil and Russia for additional supplies.

But big challenges such as poor water supplies and old infrastructure in Eurasia hamper further growth in imports from the region.