Trial now
MNI

Test, Please Ignore

EUROZONE ISSUANCE

EGB Supply for W/C Jul 26

USDCAD TECHS

Pullback Considered Corrective

US TSYS SUMMARY

What a Short, Strange Trip It's Been

GLOBAL POLITICAL RISK

Pfizer, Moderna Jabs Retain High Trust; AZ, Sputnik Lower

AUDUSD TECHS

Trend Indicators Remain Bearish

     BEIJING (MNI) - China is set to send a delegation to Washington next week
to sign a phase one trade deal with the U.S., a source close to the Ministry of
Commerce told MNI, adding that China's decision not to increase grain import
quotas would not prevent it from meeting commitments to buy more American farm
goods.
     While a phase one deal is almost certain to be signed, the identity of the
head of the Chinese delegation, together with the precise date for the trip,
have yet to be decided, the source said. The South China Morning Post quoted a
source Jan. 5 saying that Vice Premier Liu He would lead a delegation for four
days from Jan. 13, but the Global Times, an English-language newspaper under the
People's Daily, said Jan. 6 that finalising the content of a deal was more
important than signing it quickly.
     Key to the agreement will be the Chinese promise to import more U.S.
agricultural products. Comments by Vice Minister of Agriculture Han Jun,
reported by Caixin on Jan. 6, that China will not raise annual grain import
quotas, to which it committed when joining the World Trade Organization, led
some analysts to suggest that Beijing might struggle to do so. Han has
participated in the trade talks.
     But China has other ways to boost agricultural imports and honour its
commitments than raising grain import quotas, the source said.
     Some of the expanded purchases will come in the form of imports of ethanol,
and of distillers dried grains with soluble, known as DDGS, which is used as
fodder for pig and poultry. While both products are made with grains, they are
not subject to quotas.
     A second source, who regularly meets officials, added that China has
revised its standards for the use of ethanol as auto fuel in anticipation of
increased imports.
     --FODDER, PORK IMPORTS
     Policy advisors contacted by MNI were confident that the phase one signing
would take place.
     "The phase one deal will definitely be signed. It's just a matter of
whether it's sooner or later," said Mei Guanquan, Deputy Director of the World
Economy Division at the China Center for International Economic Exchanges.
Rendering the text of the agreement in two languages may take some time, Mei
said, noting that both sides will hone the wording to make it as acceptable as
possible to their domestic audiences.
     China is likely to expand imports of fodder like soybean and sorghum, as
well as of fruit, nuts and pork from the U.S., Mei said. Additional grain
imports within quota limits, Mei said, will probably be restricted to meeting
seasonal shortages or topping up national reserves.
     U.S. President Donald Trump has said that a deal will likely double Chinese
farm purchases to $40-50 billion a year.
     Achieving the top end of this range may be difficult, said Yu Miaojie, a
veteran trade expert advising several government departments, although it may be
possible to manage $40 billion, if the government boosts imports via its own
procurements, something which he added that the government is not obliged to do.
     China could easily comply with U.S. demands for it to boost imports by at
least $200 billion over 2017's levels, if Washington relaxes export restrictions
on high-tech products, said Yu, also Deputy Dean of the National School of
Development at Peking University.
     Escalating tensions between Iran and the U.S. are not likely to endanger
the phase one deal, as China and the U.S. regard the trade dispute as separate
from other geopolitical issues, according to Lv Xiang, a research fellow of the
Institute of American Studies at the Chinese Academy of Social Sciences.
     China has reduced crude imports from Iran and Beijing does not wish to get
involved into the Iran-U.S. conflict, said Xu Qinhua, Director of Centre for
International Energy and Environment Strategy Studies at Renmin University.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: archie.zhang@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com
--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,MC$$$$,MI$$$$,MT$$$$,MX$$$$,MGQ$$$]