The significance of the first phase of US-China trade deal
Question: On December 12, 2019, global
financial markets and Wall Street's major stock indexes perked up on the news
that a so-called first-phase trade deal between China and the United States
could be reached. Many people believe that this agreement is conducive to
Trump's re-election. What do you think?
Chan Kung: Let's think about what a US$ 50 billion
purchase would mean for China. Is pig farming still a good business in China?
If no one in China wants to engage in pig farming business, will China always
run short of pork, and allow the domestic price fluctuations depend on foreign
pork markets? If China continues to promote domestic pig production, it will
have to combat the impact of cheap pork prices abroad, and continues to provide
substantial subsidies. The same goes for soybeans. Unless there is a massive
subsidy, or else, whoever grows soybean in China would be really out of luck.
If soybean farming is subsidized, half of the subsidy money will be paid
abroad, and only the other half will be paid to domestic soybean farming as
subsidies. Therefore, China's agricultural policy will be in complete chaos.
This also has a negative impact on the American agricultural industry, because
the sudden growth of the market space is a kind of market disturbance, once it
depends on this market, it will pose a great risk to the American agricultural
industry. So I think that this agreement has an out-of-balance effect for the
Chinese and American industries. It may reach its peak very fast, but it is
bound to have a drastic fall
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