Trade war begins to squeeze Chinese wallets

Tariffs on US products from cars to soybeans drive faster inflation. Chinese authorities are racing to tamp down inflation to avoid public discontent, paying particular attention to soybeans, which are processed to make cooking oil, and the soymeal left over from this process is used as pig feed. As both pork and soybean oil are staples of the Chinese diet, soybean prices have a significant impact on the CPI.

The Sino-American trade war is fueling wide-ranging price increases in China, making authorities nervous as the impact starts to reach consumers.

China’s consumer price index climbed 2.5% on the year in September, a 0.2 percentage point increase from August, the National Bureau of Statistics reported Tuesday. This was the fastest rise aside from the period around the weeklong Lunar New Year — when outsize consumption tends to distort economic data — since May 2014.

Chinese authorities are racing to tamp down inflation to avoid public discontent, paying particular attention to soybeans. During a visit last month to an agricultural research facility in Heilongjiang Province, part of China’s northeastern breadbasket, President Xi Jinping asked a researcher how the soybean crop is faring, taking note of the high yield.

Soybeans are processed to make cooking oil, and the soymeal left over from this process is used as pig feed. As both pork and soybean oil are staples of the Chinese diet, soybean prices have a significant impact on the CPI.

China imports nearly 90% of the soybeans it consumes, with a third of its foreign supply coming from the U.S. But the government imposed an additional 25% tariff on American soy in July — a measure that, while intended to squeeze farmers who support U.S. President Donald Trump, also risks driving up prices in China.

Consumers are sensitive to changes in pork and cooking oil prices. Pork prices  have jumped 40% in the past six months.

Source:

https://asia.nikkei.com/Economy/Trade-War/Trade-war-begins-to-squeeze-Chinese-wallets

About the author  ⁄ AmCham Vietnam

AmCham is an independent association of companies with the objective of promoting trade and investment between Vietnam and the U.S. With two chapters, one in Ho Chi Minh City and one in Hanoi, our membership of 700 companies and 1,500 representatives is unified by a commitment to promote trade and investment between Vietnam and the United States.

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