China has ample bargaining chips to use as it faces possible trade war with US

By Hu Weijia Source:Global Times Published: 2018/3/13 22:18:40

Speculation is mounting over China's possible countermeasures against controversial tariffs imposed by the US on imported washing machines and solar panels. Will US soybeans be Beijing's first target?

Bloomberg said earlier this month that "China is studying the potential impact of trade measures imposed on soybeans imported from the US," citing unidentified sources.

China is the world's biggest soybean importer, with annual purchases estimated to reach 100 million tons in 2018 as increased demand for protein-rich feed used in pork production boosts soybean consumption. The country has been the biggest buyer of US soybeans, reportedly importing about one-third of the entire US crop. According to CNN, the soybean industry "supports tens of thousands of jobs in the US, many of them in states that voted for Trump in the 2016 election."

According to a plan submitted to the national legislature for deliberation on Tuesday, the country will set up a State grain reserves administration. China has huge reserves of corn and grain as great efforts have been made to safeguard its food security. If Beijing launches anti-dumping and anti-subsidy probes into imports of US soybeans, the government can increase the supply from reserves to the market. China can stabilize the market even if the country temporarily suspends imports of US soybeans.

In addition, Brazil-sourced soybeans have become an ideal substitute for the US crop. Brazil's share of soybean exports to China grew to 53.3 percent in 2017, while US sales accounted for only 34.4 percent of China's imports, Reuters reported.

If China's imports of soybeans from the US fall due to anti-dumping and anti-subsidy probes, the country can fill the gap with more high-protein Brazilian soybeans, which have been sold at competitive prices.

We are not sure yet whether China will target US soybeans in response to US tariffs, but China is well-prepared and has great confidence as it faces a possible trade war. China has plenty of chips with which to bargain with the US. So which goes first might depend on what hurts the US economy most.

The author is a reporter with the Global Times.


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