China refuses from US food

Chinese state-owned companies have suspended the purchases of American food in response to Washington's decision to strip Hong Kong of its privileged bilateral trade status. The development of this conflict may disrupt the first part of the trade deal between the United States and China, which was concluded in January of this year after a period of complex and lengthy negotiations. The new aggravation of bilateral relations between China and the USA is taking place against the backdrop of recession in world trade.

Chinese state-owned companies received instructions from the PRC authorities to stop purchasing pork and soybeans products from the United States as part of the first phase of the deal between the two countries. The decision was made after Washington took certain steps following the approval of the resolution on the development of the national security in Hong Kong (the resolution was approved by the All-China People's Congress (the highest legislative body of the PRC)).

On May 29, Donald Trump announced that the United States would deprive Hong Kong of its privileged status and economic benefits, because, due to Beijing's actions, Hong Kong ceased to be a separate part of the PRC.

It goes about export control, the use of dual-use technologies, as well as the customs clearance of goods. Until recently, Washington viewed Hong Kong as a customs territory unrelated to mainland China). Donald Trump also announced sanctions against Chinese and Hong Kong officials, who, according to Washington, were directly or indirectly involved in infringing on the autonomy of Hong Kong as a Special Administrative Region of the PRC.

China's refusal to purchase American food products may cause the trade deal between the United States and China to all apart.

Under the terms of the deal, which was concluded in January, China was supposed to increase the volume of purchases in exchange for Washington's refusal to hold the last round of tariffs raise and agreement to halve (down to 7.5%) the tariff for Chinese imports in the amount of $112 billion.

In January, China promised to increase imports from the United States in the next two years by not less than $200 billion compared with the level of 2017, when supplies of goods amounted to $130 billion, services - $56 billion).

This implies an increase in energy imports of about $50 billion in two years,

  • engineering products - $80 billion,
  • services - $35 billion,
  • agricultural products - $32 billion.

According to the US Ministry of Agriculture, in the first quarter of 2020, China bought soybeans from the United States worth $1 billion and pork - $691 million.

In 2019, Hong Kong exports (re-exports from China) to the United States decreased by 15% (to $39 billion), and imports - by 8% (to $27.3 billion). The restriction on the transfer of American technology and the expansion of "export control" to Hong Kong, especially in terms of dual-use technologies, will be more sensitive.

It is worthy of note that the new confrontation in bilateral relations between China and the USA have appeared amid another recession in world trade. The volume of global exports in March 2020 decreased by 11.9%.

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Author`s name Dmitry Sudakov