Update on USSEC China
By Zhang Xiaoping
USSEC Regional Director – Greater China
I am happy to report that all USSEC China staff and their families are unaffected by COVID-2019 (formerly referred to as coronavirus). Following the extended Lunar New Year holiday, all USSEC China staff is working remotely from home to minimize exposure to COVID-2019. We will do so for another week, as new confirmed cases in non-Hubei areas peaked 10 days ago. [The Hubei province has been the epicenter of the epidemic.]
Currently, except in some blocked cities/communities/villages, people can leave their homes wearing face masks. Procuring face masks is a challenge, and while the St. Louis office sent us a package containing face masks, we are unsure if the parcel has arrived yet, as our offices are still closed.
Students are not allowed to go back to school before the end of February, and government at all levels continues to advise citizens of precautions during commuting to/from workplaces and has recommended flexible office hours and working remotely.
Temperature checks are happening almost everywhere in China, and many cities have restricted inbound transportation as they work to contain the disease.
Many industry events have been postponed to May and beyond, and a big impact on the economy is foreseeable, especially for the restaurant and entertainment industries. Consumer price index (CPI) for January was 5.4 year on year, the highest since October 2011, and gross domestic product (GDP) for the first quarter is now projected at around 5.2%, which will probably be the lowest since 1990.
The Chinese foreign minister said China is prepared to implement the Phase One Deal as scheduled. Currently, importers have started shifting their purchase to South American suppliers, but with improved crush margin in recent weeks, nearby Pacific Northwest (PNW) shipments would be attractive. The problem, however, for most importers is lack of Tariff Exemption Quota (TEQ), without which trade is impossible as a retaliatory tariff of 27.5% is still in place. The current fight against COVID-2019 is an overwhelming task for the Chinese government, which may delay the issuance of a new TEQ for importers. U.S. Soy may see a recovery increase in demand in early summer after the epidemic is gone. China can still import a total of approximately 90 million metric tons (MMT) of soybeans, of which 36-40 MMT could be from the U.S. in the 2020 calendar year to fulfill its commitments in the Phase One Deal.