China is studying ways that it could accelerate purchases of U.S. farm goods to meet its phase-one trade deal commitments after the coronavirus delayed some imports, according to people familiar with the matter.
The proposals being considered include potentially buying 10 million tons of American soybeans for Chinese state reserves if demand from private buyers isn’t enough, said the people, who asked not to be identified as the discussions are private. A final decision has yet to be made on what actions may be taken, according to the people.
China could also fulfill its annual import quota of corn, which is currently at 7.2 million tons, with the grain from America, the people said. It may also consider buying more than the quota, potentially reaching a total of as much as 20 million tons in U.S. corn imports, they said. China’s Ministry of Commerce didn’t respond to an inquiry from Bloomberg News.
The trade deal with Washington that was inked in December had Beijing commit to buying as much as $50 billion a year in agricultural commodities over two years, a level that some analysts doubted would be feasible. Though China had taken steps to boost imports, the coronavirus outbreak that led to locking down most of the country had sapped demand as logistics and ports came to a standstill.
Earlier in February, Chinese officials were hoping that the U.S. would agree to some flexibility on pledges, people familiar with the discussions said at the time. Since then, China has gradually started to reopen its economy on hopes the virus is under control, though consumption remains fragile.
Also, Chinese official may be worried about food security after some nations moved to restrict exports to safeguard domestic supplies. Vietnam, Russia and Kazakhstan are among countries that imposed restrictions on shipments of some staple foods, sparking concern that others may follow suit.
Reuters earlier reported that China plans to buy 10 million tons of soy, 20 million tons of corn, and 1 million tons of cotton for state reserves, in part to protect against supply disruptions but also to meet its obligations for trade.
Meanwhile, there is still some opposition. Some officials raised questions over whether the government should be funding efforts to expedite U.S. imports given the downturn in the economy from the virus fallout, according to one of the people. These discussions are still at the lower levels of the government hierarchy, and no final decision has been made, the person said.
China’s entered its first economic contraction in decades in the first quarter, shrinking 6.8% from a year ago as output from the catering and accomodation industry plunged 35.3%. The closure of restaurants hurt consumption of meat, reducing the need for imported soybeans which are used to feed livestock.