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China halts purchases of some US farm goods

According to sources familiar with the matter, the Chinese government is telling companies to cease imports of key US agriculture commodities after Washington said it would eliminate special treatment for Hong Kong to punish Beijing.

2 June 2020, at 11:27am

According to reporting from Reuters, sources said that China told state-owned firms to halt large-scale US soybean and pork purchases. One of the sources said state purchases of US corn and cotton have also been put on hold.

China is ready to suspend imports of more American agriculture products if Washington takes further action on Hong Kong, the sources said.

Any sustained halt in buying would further threaten progress in meeting goals set in the Phase 1 trade deal signed in January. China pledged to significantly boost purchases of US agricultural products, after slashing imports during the bruising trade war.

The US Department of Agriculture and US Trade Representative's office did not immediately respond to requests for comment.

Chinese foreign ministry spokesman Zhao Lijan told reporters during a daily briefing Tuesday that he was unaware of the situation.

On Friday 29 May, President Trump said he was directing his administration to begin the process of eliminating special treatment for Hong Kong in response to China's plans to impose new security legislation. China said on 1 June it will counter US attempts to harm Beijing's interests.

Chinese importers cancelled 10,000 to 20,000 tonnes of American pork shipments, equivalent to roughly one week's orders in recent months following Trump's comments on Friday, the source said.

In a worst-case scenario, if Trump continues to target China, Beijing will scrap the Phase 1 deal, a second source familiar with the government plan said.

"There's no way Beijing can buy goods from the US when receiving constant attacks from Trump," the person said.

US corn, wheat and lean hog futures weakened on Monday due to concerns about rising trade tensions. Soybeans were flat.

Under the initial trade deal, China pledged to buy an additional $32 billion worth of US agriculture products over two years above a baseline based on 2017 figures.

The USDA reported that China bought $1.028 billion worth of soybeans and $691 million of pork in the first quarter of 2020. China also bought corn, wheat and soyoil this year.

Pork in a chilled grocery case

China has also been purchasing soybeans in recent weeks from Brazil, during that country's peak export season.

Private Chinese importers have not received a government order to suspend all buying, although commercial buyers are very cautious, according to a third source with a major trading house.

"A certain scale of trade will be halted" but it is not a full stop, said a fourth source familiar with government plan.

China could easily find other sellers of farm products, he added.

The sources all declined to be named due to the sensitivity of the matter.

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