Supply-chain management by China crucial to winning trade war with US

By Hu Weijia Source:Global Times Published: 2018/8/6 22:18:40

US soybean farmers are caught in the crosshairs of an escalating trade conflict as China draws up long-term plans to adjust its own industrial structure and foreign trade.

In 2018, China is likely to reduce its soybean imports by more than 10 million tons, through market methods like expanding domestic cultivation area, increasing imports of soymeal substitutes and popularizing low-protein feed, Beijing-based Economic Daily reported. The Ministry of Agriculture announced at a press conference in May that China is likely to raise its soybean planting area by 10 million mu (0.67 million hectares) in 2018. China imports 60 percent of global soybean production, and it bought 32.9 million tons from the US in 2017, accounting for 34 percent of the total purchases, according to a Reuters report.  If China can cut its soybean imports by 10 million tons, an additional 25 percent tariff on US soybeans is unlikely to have much impact on domestic soybean prices.

China is prepared for a protracted trade conflict with the US, with a long-term plan to make timely fine-tuning adjustments of its industrial chain and economic structure, and soybeans are just one example. The trade conflict is prompting China to orient toward import substitution. For instance, many expect US automakers will speed up the pace of shifting production to China after Beijing announced an additional 25 percent tariff on US automotive products. Because of the general trend of industrial transfer, US exports and imports with China will probably shrink, and this will be an irreversible trend.

The trade conflict could threaten the global trade order, disrupting supply chains between China and the US. Trade tensions are prompting China to substitute US goods with supplies from other sources such as Brazil, Europe and Southeast Asia. The long-term effects of the economic conflict on Sino-US trade are a growing source of concern. The trade dispute is becoming a protracted war. Without a long-term plan and good supply-chain management, China is unlikely to win this war. Trade tensions between China and the US are adding uncertainty to the world economy and global supply chains, and we need to prepare for this and guide this process.

The author is a reporter with the Global Times.


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