The Chinese government’s latest released economic figures bore more bad news, as Chinese Premier Li Keqiang made a speech acknowledging “significant difficulties” ahead for the economy.
Meanwhile, Beijing finally confirmed for the first time details of the U.S.–China trade deal announced by U.S. President Donald Trump last week.
“What the U.S. side said is the real situation, and is consistent with what we know,” Geng Shuang, spokesman for China’s foreign ministry, said on Oct. 15 regarding the phase one trade deal.
The deal was announced at the White House on Oct. 11 after Chinese Vice Premier Liu He visited for trade negotiations. Trump said that China had agreed to purchase $40 billion to $50 billion worth of U.S. agricultural goods in exchange for suspending a scheduled U.S. tariff hike on Chinese goods.
The confirmation came four days late, with Geng and other officials previously refusing to answer reporters’ questions about the trade deal. Meanwhile, state media gave little coverage of the trade deal.
On Oct. 15, Geng provided figures on how much U.S. agricultural goods Chinese businesses have bought so far this year, noting that “China will speed up buying more American agricultural products.”
Geng emphasized that China and the United States “have no different opinions” on the trade deal.
According to U.S.-based commentator Tang Jingyuan, the delay was likely because Chinese leader Xi Jinping and other top officials had to give the final okay on the deal, after gauging the U.S. administration’s stance.
U.S. Secretary of Treasury Steven Mnuchin told media on Oct. 14 that the U.S. administration could proceed with the December tariff hike if the “phase one” deal isn’t finalized by then.
“Chinese authorities also confirmed the trade deal because China really needs the deal to get their hands on American agricultural products, especially pork,” Tang told The Epoch Times on Oct. 15.
Economy in Trouble
China’s National Bureau of Statistics released its Consumer Price Index (CPI) and Producer Price Index (PPI) figures on Oct. 15.
In September, China’s CPI increased 3.0 percent compared to last year. Food prices in particular went up 11.2 percent, while due to lack of supply, pork prices increased by 69.3 percent compared to last year. Other meats, such as beef, lamb, chicken, and duck, also got price hikes of 9.4 percent to 18.8 percent.
The African Swine Fever (ASF) epidemic, which first broke out in August last year, has decimated China’s hog business, sending pork prices skyrocketing.
“From the second half of 2019 to the first half of next year, the shortfall in pork supply in China will be around 10 million metric tons,” Wei Xin, a breeding industry researcher at state-run bank CITIC, was quoted as saying to Chinese state-run publication Business Network. China is the world’s biggest consumer of pork.
Lin Guofa, research director at Chinese consultancy Bric Agri-Info Network, thought the shortfall could be higher. He told Business Network that production in 2019 could be 11 million to 12.75 million metric tons less.
The shortage has forced China to import more pork. According to China’s official customs data, the country imported 1.19 million metric tons of pork in 2018. In the first three quarters of 2019, it has already imported more pork: 1.32 million metric tons.
New York headquartered financial services company FCStone estimated in August that China needed about seven years to return to normal hog production levels pre-ASF, and would need to import a total of 3.3 million metric tons of pork in 2019 and 4.2 million metric tons in 2020.
Meanwhile, the United States is the world’s second-biggest pork exporter. But due to the ongoing trade dispute, China imposed retaliatory tariffs on a slew of U.S. agricultural products, including pork. Thus, U.S. pork exports to China fell dramatically.
In the first eight months of this year, the United States exported 93,245 metric tons of pork to China, compared to 351,774 metric tons in 2018 and 495,637 metric tons the year prior, according to data from the U.S. Meat Export Federation.
Meanwhile, China’s PPI—considered a key barometer for corporate profitability—decreased 1.2 percent in September, compared to the same period last year. The price of production materials decreased by 2.0 percent, with prices in the business, oil and gas, coal, and ferrous metals categories experiencing the steepest declines.
PPI deflation indicates that China’s manufacturing sectors are cooling.
Chinese Premier Li Keqiang organized an economic forum in Xi’an City, Shaanxi province on Oct. 14, in which he asked provincial governors to launch new policies to stimulate the economy.
“China’s real economy is facing significant difficulties. Domestic demand is weak… Some regions are lacking in development momentum,” Li said, according to state-run media Xinhua.
Li asked provincial governments “to enhance bottom line awareness,” hinting at the intensity of Beijing’s concerns about the economy.
He added that international trade was key to the Chinese regime’s economic policies.
“The international trade that Li talked about includes foreign investment, imports, and exports,” Tang said. “Li’s order confirms the importance of the U.S.–China trade deal. Suspending the scheduled tariff hike on Chinese products could help China increase exports.”
Reuters contributed to this report.