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China nears promised purchases of US goods in October but pace seen slowing

China came within striking distance of its monthly purchase commitments of U.S. goods under the countries' "phase one" trade agreement for the first time in October, though it may reflect a short-lived spike due to the seasonality of China's agricultural demand.

China purchased $11.17 billion of U.S. goods covered by the deal, according to the latest data from Panjiva, an business line of S&P Global Market Intelligence that tracks international trade and supply chains. Monthly imports since the deal was implemented in January had previously failed to reach $9 billion, with the previous high of $8.56 billion coming in September.

"They are narrowing the gap between promise and reality, but at this point it looks unlikely that they will fully close it," said Bill Reinsch, a chair in international business at the Center for Strategic and International Studies.

To meet its two-year commitment under the deal to increase its goods purchases by more than $200 billion over 2017 levels, China would need to purchase an average of $11.9 billion worth of a basket of 458 agricultural, energy and manufactured goods every month in 2020 and 2021. Imports of all goods covered by the deal since January totaled $67.61 billion through October, well short of the $119.30 billion pace for compliance.

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The October total was buoyed by a 308% spike in agricultural product shipments compared with 2017 levels. Chinese purchases of U.S. farm goods were worth $4.84 billion in October, driven by $3.50 billion worth of soybean shipments.

"No surprise," Reinsch said. "They [China] do the bulk of their ag purchases in Q4 each year, and that's happening again."

Chris Rogers, a senior researcher at Panjiva, noted that weekly deliveries to China in November have slowed, which could well signal that the high import tally will not be kept up over that month.

Chinese imports of U.S. energy products, meanwhile, were $1.25 billion in October, a 146.6% increase over 2017 levels, though still well below the $2.18 billion monthly average needed to reach the commitments in the deal.

Dropping global oil prices could have led to this missed target, Rogers said.

No further tariffs

White House Economic Adviser Larry Kudlow told The Washington Post in an online interview Dec. 7 that China is "abiding by a good chunk" of the trade deal, adding that though the nation is behind in its farm and other purchases, no further tariffs are planned.

The phase one deal was hailed as a détente in the trade war between the two countries, but U.S.-China trade relations have frayed further since then. Most recently, the U.S. on Dec. 2 banned cotton imports from the Xinjiang Production and Construction Corps, one of the largest cotton producers in the world, due to its alleged ties to the use of forced labor of China's majority-Muslim Uighur population. China has denied all such allegations.

This followed a September move by Washington to ban the importation of products from five Chinese apparel and technology suppliers over their ties to the alleged oppression of the Uighurs.

President-elect Joe Biden told The New York Times this month that he would not immediately nullify the phase one deal with China nor take steps to remove tariffs imposed by the Trump administration on Beijing. Biden did say, however, that he would continue to crack down on China's alleged practices of intellectual property theft and forced technology transfers, which have been at the heart of the trade dispute between the two nations.

Panjiva is a business line of S&P Global Market Intelligence, a division of S&P Global Inc.