WASHINGTON, DC – Chinese government officials told major state-run agricultural companies to pause purchases of some American farm goods including soybeans as Beijing evaluates the ongoing escalation of tensions with the U.S. over Hong Kong, according to people familiar with the situation.
State-owned traders Cofco and Sinograin were ordered to suspend purchases, according to one of the people, who asked not to be identified discussing a private matter. Chinese buyers have also canceled an unspecified number of U.S. pork orders, one of the people said.
Bloomberg News reports that the halt is the latest sign that the hard won phase-one trade deal between the world’s two biggest economies is in jeopardy. While Chinese Premier Li Keqiang last month reiterated a pledge to implement the agreement that was inked in January, tensions have continued to escalate since then amid a standoff over Beijing’s move to tighten its grip on Hong Kong and President Trump accusing China of failing to report the coronavirus outbreak earlier. The virus is believed to have originated in that country.
Beijing’s move eroded the risk-on sentiment that had been prevailing over markets. S&P 500 Index futures gave up gains to trade 0.6% lower, while U.S. 10-year bonds erased declines. The onshore yuan reversed its advance, while soybean futures in Chicago, which had been as much as 1% higher, were little changed.
The measures to halt imports come after President Donald Trump on Friday lobbed a barrage of criticism at Beijing after it moved to impose controversial new national security legislation on Hong Kong.
Critics say it will crack down on dissent and undermine the “one country, two systems” principle that has kept Hong Kong autonomous of the mainland since the 1997 handover from the British.
In turn, China is pointing to the killing of George Floyd in Minneapolis and ongoing riots occurring across the U.S. over the death of the man at the hands of a police officer, as evidence the United States also has a heavy hand in quelling civil unrest.
Cofco and Sinograin are China’s key importers of farm goods. They had been making pricing inquiries for 20 to 30 cargoes of U.S. soybeans on Friday but held off on going through with purchases after Trump indicated he would punish Chinese officials, one of the people said. Beijing is waiting to see what steps Trump takes before deciding its next move, one of the people said.
Trump said the U.S. would begin the process of stripping some of Hong Kong’s privileged trade status, without detailing how many changes would take effect and how many exemptions would apply. He also promised sanctions against Chinese and Hong Kong officials “directly or indirectly involved” in eroding Hong Kong’s autonomy, though stopped short of giving specifics.
It’s unclear how soon the U.S. would move on a range of options, from sanctioning Chinese officials to imposing tariffs on Hong Kong to attacking the territory’s financial stability.
