US - China Relations: Chinese Companies Buying US Soybeans Despite Government Order To Halt Purchases

Amid tense trade relations between China and the U.S., at least three state-owned Chinese companies purchased three cargoes of soybeans to be imported around October or November, according to a report from Reuters.

Some U.S. traders said they believe it was to help cover the country’s needs through the end of 2020 while others expressed general confusion over the large purchase.

“It’s murky, really hard to say,” one trade expert, whose name was not released, told Reuters. “Maybe they wanted to knock a few cents off the price, or maybe there’s some other agenda.”

A possible reason may also be the recent African swine flu outbreak in China’s Gansu Province. The outbreak reportedly “decimated” a good portion of China’s pig population and impacted the country’s soybean demand.

However, one expert said there has been a weaker demand for soybeans in China.

“Partly, it’s because of the virus outbreak (that) actually impaired the logistic arrangements between China and the U.S., and also after the virus outbreak, what we see is that the domestic demand in China is actually collapsing,” Bank of Communications’ Hao Hong told CNBC. “With logistic concerns and also with collapsing domestic demand, it’s not difficult to see how China would require less of the soybean input.”

The mass purchase follows orders from the Chinese government on Monday to stop buying farm products, like soybeans and pork, from the U.S. in retaliation for Trump’s threat to end special treatment afforded to Hong Kong. Trump said on Friday that advantages like extradition treatment to export controls would be stripped because of new security legislation imposed on the city.

“There’s no way Beijing can buy goods from the U.S. when receiving constant attacks from Trump,” a source familiar with the tensions told Reuters.

Shortly after officials ordered traders to stop buying U.S. farm goods, importers canceled orders for between 10,000 and 20,000 tonnes of pork. Corn and cotton purchases have also been placed on hold as a result of the stoppage.