China Shifts Purchase Priorities From Manufacturing Materials to Food…

An interesting article in the South China Morning Post (SCMP) highlights how China is shifting their procurement priority from minerals used in manufacturing (cobalt, copper) to the acquisition of food and agriculture products.

The impact is being felt throughout Africa, where mining companies are shutting down operations because Chinese demand no longer exists.

Articles like this highlight the ancillary impacts of a weakened Chinese economy.

Despite the proclamations by Beijing about their ability to withstand the withdrawal of the U.S. as a primary customer for manufactured goods, reality shows they cannot.

There is a confluence of events all leading to radical changes just below the surface.  China has been burning cash to subsidize industries impacted by U.S. tariffs.  Simultaneously Beijing has lowered the value of their currency in an effort to eliminate the tariff impact in the cost of their finished goods. However, as the ideological economic conflict between the U.S. and China continues, Beijing cannot hold their position indefinitely.

[…]  A decelerating construction boom in China also has led to a decline in demand for copper while Beijing’s move to raise standards for electric vehicles qualifying for subsidies is depressing the market for cobalt.

An economic slowdown in some African countries is seen as tied to China’s economic slowdown, accelerated by the tariff battle. (link)

Countries that attached their economy to purchase agreements with China over the last 20 years became dependent on those exports.  As China slows or stops their purchases those dependent economies are now at risk.

[…] Martyn Davies, managing director of emerging markets and Africa at Deloitte, said China’s demand for commodities has underpinned Africa’s growth for 20 years.

“Any commodity-exporting economy’s growth model has been underpinned by China’s demand for commodities in the last generation,” Davies said.

“This in itself has resulted in complacency in many commodity exporting countries because if you had China growing at 7 or 8 per cent, you don’t need to struggle. “Unfortunately,” Davies said, “the world has changed.”  (link)

And now China’s biggest weakness starts to surface.  A country that cannot feed its own population even during the best of times, is now facing a downturn in economic and employment activity while the need to import food remains.

[…] analysts say that while countries that export cobalt, copper and iron ore will be hardest hit as Beijing – the major buyer of Africa’s hard commodities – diversifies the sourcing of its imports during the trade war, opportunities are opening up for exporters of soft commodities, such as agricultural products. (link)

There comes a time in the life of a panda when bamboo is no-longer taken for granted.

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This entry was posted in Big Government, China, Donald Trump, Economy, European Union, Hong Kong, media bias, President Trump, Trade Deal, Uncategorized, US dept of agriculture, US Treasury, USA, USMCA. Bookmark the permalink.

226 Responses to China Shifts Purchase Priorities From Manufacturing Materials to Food…

  1. Bill Dumanch says:

    100% True. Correct. Gold Medal Winner.

    Like

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