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Thursday, January 02, 2020
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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