China rebuilds farming supply chain amid trade war

By Wang Jiamei Source:Global Times Published: 2019/7/31 17:58:41

Illustration: Luo Xuan/GT

Last week, China's General Administration of Customs announced it had approved soybean imports from all parts of Russia and wheat imports from the Kurgan region of Russia.

The move came as an obvious indication of the two economies' deepened bilateral trade in agricultural products. Currently, Russia and China are reportedly negotiating their cooperation in agricultural trade. In April, Russia's deputy prime minister Yury Trutnev traveled to Beijing to discuss Russian exports of soybeans, dairy products and meat to China. Trutnev also stated that Russia will increase its soybean exports to China to 2 million tons per year by 2024.

China's strengthened trade cooperation with Russia for soybeans and other agricultural goods is not only in line with the requirements of the China-Russia comprehensive strategic partnership of coordination for a new era, but is also in line with the Chinese need to rebuild the import supply chain of agricultural products amid the simmering US-China trade war.

Take the high-profile soybean trade as an example. China has been making efforts to seek diversified overseas soybean suppliers. In July, Rusagro, one of Russia's largest agricultural companies, shipped its first bulk vessel, or 4,400 tons, of soybean to China, with China's COFCO Trading being the buyer.

Yet, it is undeniable that Russia's soybean exports to China remain quite low due to the country's limited output. According to data from customs authorities in Harbin, Northeast China's Heilongjiang Province, the imports of Russian soybeans through the nine ports in Heilongjiang totaled around 800,000 tons in 2018, up 60.1 percent year-on-year and marking a record high, but the volume only accounted for about 0.9 percent of China's total soybean imports during the year. 

Imports of Russia's soybean can hardly fill the gap left by the US in the Chinese market, but from the perspective of import diversification, it still makes sense for China to explore the soybean supply potential in Russia. 

In fact, China has already managed to diversify its soybean imports away from the US, with Brazil replacing the US to become China's largest supply source of soybeans. According to China's Ministry of Commerce, China imported 24.39 million tons of soybeans in the first four months of this year, down 7.9 percent year-on-year. While imports from the US plummeted by 70.6 percent to 4.31 million tons, soybean imports from Brazil rose by 46.8 percent to 15.5 million tons, and the imports from Argentina soared 23-fold to 2.15 million tons.

China's import diversification effort is not limited to soybeans, but covers a wide range of farmed goods. For instance, COFCO Corp, China's state-owned agricultural giant, has been investing in countries along the Belt and Road route to improve the positioning of its supply chain assets for years. By 2020, it aims to have invested 10 million yuan ($1.45 million) in Belt and Road countries, trading 30 million tons of grain, controlling 10 million tons of first-hand grain sources, and importing 5-billion-yuan worth of food.

Moreover, since Chinese customs authorities in June removed the requirement for cherries to be held in low-temperature storage for 16 days before shipment, Turkey will likely boost its cherry exports to China in the coming months. China previously imported cherries mainly from the US during the month of July, but this summer US cherry exports are expected to face fierce competition from a newcomer in the Chinese market.

While China hasn't completely stopped US imports of agricultural goods, its attempt to make proper and targeted adjustments to its agricultural import supply chain, largely motivated by the trade tensions, could still place pressure on the Trump administration. It should be pointed out that such import diversification efforts are not simply intended to be bargaining chips in the trade war. By taking the opportunity that trade disputes with the US have provided, China's rebuilding of its agricultural import supply chain is not only conducive to the country's food security, but may also further improve the quality of agricultural products, bringing its people more choices of high-quality farm goods.

For instance, although Russia's soybean output may be quite limited at present, all are non-GMO soybeans. Russia is one of the few countries in the world that explicitly prohibits the planting of genetically-modified crops, which is why it is generally expected that the green, non-GMO characteristics of Russian agricultural products will attract plenty of Chinese customers in the near future. 

The author is a reporter with the Global Times.

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