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Home / World / China's rising food prices will not weaken its hand in the trade war

China's rising food prices will not weaken its hand in the trade war



The rise in food prices – which may only worsen if US agricultural imports are halted – will not, according to experts, have any major impact on Beijing, as the war against Washington remains promising. [19659002] New data on Friday showed that food prices in China rose 9.1% yoy in July. A significant factor was the 27% increase in pork prices following the outbreak of African swine fever, while fresh fruit prices also increased by 39.1%.

The figures come from China's announcement to stop US imports of agricultural products This was a retraction for President Donald Trump, who set a 1

0% duty on another $ 300 billion for Chinese goods.

While economists suspect a short-term increase in inflation, they believe that Beijing has a number of options to mitigate its impact before it starts to have a political impact.

"China has a price-control mechanism to slow down the rise in food prices, and there are government inventories that could ease food price inflation," Iris Pang, an economist for Greater China at ING, told CNBC by email ,

"It is planned to grow more agricultural products that are currently imported from the rest of the world," she added.

departure from US imports

USA. In 2018, total exports of agricultural products to China amounted to $ 9.3 billion, and China is increasingly reliant on imports to offset its domestic agricultural restrictions.

If China is forced to seek new trading partners to secure its food security, this could be. If one considers higher import prices, the exporting nations are trying to exploit the increasing urgency of their demand.

"There is certainly scope for exporters to use the trade war to increase their selling price, which will happen and provide additional tailwind for the more important domestic drivers mentioned above," said TS Lombard economist in China and North Asia CNBC Friday.

"However, with foods such as soybeans, fruit and pork being fungible, with individual suppliers pushing prices too high, China can go elsewhere."

The difficulty here, he added, would be the sheer volume of pork needed, meaning that other protein sources, such as chicken, could be used to meet domestic demand.

The European Union is China's largest trading partner, and China plans to import more agricultural products from Europe to reduce the loss of US imports along with increasing domestic sustainability.

No more than a hostage

Green suggested that state involvement in food purchases means that the Chinese government can pay the extra cost of trading from elsewhere before the price increases are fully passed on to consumers.

In addition, sourcing from outside the US will increase China's food security by reducing US dependency as a single provider, meaning that China will no longer "hostage" possible export restrictions, "Green said in the future

This would mean that rising food prices are unlikely to force President Xi Jinping to adopt a softer attitude towards Washington, as the authorities would pay higher prices for European pork or South American soybeans rather than easing off to the US

A soybean field in near Salem, South Dakota.

Scott Olson / Getty Images

"For some years, China has been trying to turn away from the US as the main provider of agricultural products. The goal is to control all aspects of Chinese food supply." Green said in Russia, Eastern Europe, Africa and South America . "

In 2014, Beijing actively exchanged US corn for Ukrainian corn, cutting US purchases by 90%. According to Green, the US will do so if the trade war does not end soon, suffers a permanent loss of its market share in the Chinese soybean market.

Soybeans account for US $ 3.1 billion of US domestic exports to China, one-third of its total agricultural exports to China.


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