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China: 5 things to think about

Trade, studying abroad and travel among items to mull

by Bloomberg News

There are few things better at showing how global the world has become than the Chinese dinner table.

China’s growing appetite for beef has been a boon for ranchers in Australia. A taste for fine wine has done the same for vineyards in France. Japanese oysters are likewise popular.

The same could be said of American soybeans from Iowa, almonds from California and lobsters from Maine. Well, until the trade war of course.

China raised tariffs on a plethora of U.S. imports from June 1, including tomato ketchup, orange juice and tequila. But it’s more than just American farmers feeling the pain.

China needs the world to feed itself. As the country’s 1.4 billion-strong population gets richer, they’re eating more meat than ever. That’s made China dependent on foreign suppliers for soy and other meal to feed its hogs, cattle and poultry.

The spread this year of a deadly pig epidemic has made that dependence more acute. African swine fever could reduce Chinese hog production this year by 134 million head — equal to America’s entire annual output.

Another threat on the horizon is a small caterpillar that’s spread to China from the Americas. The fall armyworm has already affected 220,000 acres of grain production in China and is expected to spread further. The impact on supplies of rice, corn and vegetables could be substantial.

But tariffs won’t stop China from getting the agricultural goods it needs. It’ll just pay more for them. And there will still be buyers for America’s farm goods, just significantly fewer. The world will go on. Everyone will just be less well off than they could be.

Studying Abroad

The trade war isn't just in the kitchen. It's also in the classroom. The Trump administration is scrutinizing researchers at some of America's most-prestigious universities for ties to Beijing and restricting visas for students from China. That's left many Chinese students and academics feeling the environment in the U.S. has become increasingly unfriendly. The Chinese government warned the country's students and scholars this week to "strengthen risk assessments" before going abroad.

Travel Advisory

Another warning from Beijing this week was for Chinese tourists thinking about a trip to America. The country's Ministry of Culture and Tourism cited recent "frequent" shootings, robbery and theft as reason why its citizens might reconsider. China has used tourism as a weapon in the past, notably against South Korea in 2017 after Seoul agreed to deploy an American missile system. The potential pain it could cause is not insignificant. Three million Chinese tourists visited the U.S. last year, spending $36.4 billion while they were there.

Corporate Risk

The mood music for corporate America has also turned a bit more ominous. First was an investigation Beijing launched into "wrongful" deliveries by FedEx. That came after Huawei said two of its packages containing documents being sent from Japan to China were diverted by the American delivery company to the U.S. without authorization. Next came a $23.6 million fine levied against Ford Motor's main joint venture in China for antitrust violations.

Creeping Doubt

Chinese retaliation and American threats of higher tariffs have stirred growing anxiety that Beijing and Washington will fail to work out their differences through negotiations. Former Secretary of State Rex Tillerson said this week he's concerned that China may conclude it's not possible to strike a deal with the Trump administration. BNP Paribas's chief China economists echoed that worry, saying the imposition of tariffs against Mexico could lead China's leaders to decide there's no point in trying to forge an agreement with America. Former Chinese Commerce Minister Chen Deming said a quick trade deal is unlikely.

Beverage Billions

But let's finish with some optimism. More than seven decades ago, Lo Kwee-seong founded Vitasoy in Hong Kong to produce soy milk. Now, having endured through World War II, the Cold War, and various financial crises, Lo's company sells into 40 markets — with mainland China accounting for more than half of its revenue — and his family is worth a combined $1.5 billion. Business can not only survive in difficult times, it has the ability to flourish.

To contact Bloomberg News staff for this story:
John Liu in Beijing at jliu42@bloomberg.net
To contact the editor responsible for this story:
Sharon Chen at schen462@bloomberg.net
© 2019 Bloomberg L.P.
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