Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.US-China Trade Still in Headlines as 2020 Opens
China remains the focal point for many in U.S. agriculture as 2020 arrives, with the signing of the phase-one trade deal now expected to happen January 15.
China has taken actions on imports, implementing provisional import tax rates that are lower than the most-favored-nation rates for more than 850 commodities on Jan. 1, 2020. The list includes frozen pork, frozen avocados and non-frozen orange juice, in addition to some pharmaceutical products/materials.
China signaled the action was coming just ahead of 2020 and appears to have made good on the action.
This also puts attention on the level of tariff reductions that will be seen under the Phase One agreement which would greatly enhance U.S. competitiveness in several areas.
Chief U.S. ag trade negotiator Gregg Doud said the purchase commitments by China equate to $16 billion in additional ag buys beyond the $24 billion baseline level of Chinese purchases in 2017, which was before the trade war with the U.S.
CCC Commodity Loan Interest Rate Down For January
Marketing Assistance Loans of less than one year disbursed in January will carry an interest rate of 2.5%, according to the Commodity Credit Corporation (CCC).
The rate for January is down from 2.625% in December.
While not a significant decline, this still gives those opting to use the marketing assistance loan program a slightly lower cost to the nine-month loans. And, loan activity at times can pick up in January as producers seek cash flow.
Washington Insider: Outlook for China Tech
The media is full of prognostications these days, mainly focused on the U.S. outlook. However, Bloomberg is focusing heavily on China, as well, and says this week that the tech industry there enters a new year after weathering unprecedented turbulence in 2019.
In the past, when giants emerged in social media and artificial intelligence they faced “the brunt of Washington’s campaign to contain the world’s No. 2 economy,” Bloomberg says and believes that there is little reason to think 2020 will be much different, given U.S. efforts to hobble Chinese champions from Huawei Technologies Co. to SenseTime Group Ltd.
American lawmakers went after some of the country’s biggest names last year. The heightened scrutiny came just as pressure back home intensified.
Beijing worked to scrub sensitive content from ByteDance apps and Tencent Holdings Ltd.’s WeChat, while the economy grew at its slowest pace in decades. Investors cooled on the sector with venture capital activity halving, triggering fears the industry’s heyday is over.
That in turn demoralized the country’s already-overworked tech professionals, who rebelled for the first time against the 70-plus hour workweeks that Alibaba founder Jack Ma labeled the norm.
Now Bloomberg thinks that, given Washington’s increasing hostility, China is even more intent on devising alternatives to foreign technology from AI chips to blockchain solutions while propping up local champions and that this is “bad news for the likes of Qualcomm Inc. and Apple Inc. that depend on China for much of their revenue.”
It has started to upend a decades-old supply chain centered around China, threatening to split the old world order in two. It’s not just in hardware, from Russia to Southeast Asia, many governments have begun to co-opt characteristics of the Chinese internet arena, from harsh fake-news laws to censorship and data sovereignty.
This was the first year we understood China tech at its most global ever – but that glimpse revealed “the specter of it becoming more and more insular,” said Michael Norris, research and strategy manager at Shanghai-based consultancy AgencyChina. “This is bigger than just the U.S., in terms of assuaging the fears of countries like India that (Chinese) platforms aren’t going to disseminate nude photographs or hate speech.”
The industry’s woes may be best quantified by a plunge in capital flow. The amount of venture money invested plummeted by more than 50% to about $50 billion from a record $112 billion in 2018, when it topped the U.S., according to the market research firm Preqin. Funding dropped in the U.S., too, but only slightly. China birthed only 15 unicorns, or startups worth at least $1 billion, down from 35 the year before, according to CB Insights.
The decline coincided with a loss of confidence in some of the industry’s marquee names, exemplified by the rocky debuts of WeWork and Uber Technologies Inc. While Alibaba raised $13 billion in a milestone Hong Kong offering, smaller names like SenseTime and Full Truck Alliance struggled to raise capital. “The power of the mobile revolution is coming to an end. Globally, we are seeking what comes next,” said Kai-Fu Lee, founder of Sinovation Ventures.
The startup and venture capital industry is likely headed for a shakeout. Many investments from the past bubbly years aren’t panning out, with startups struggling to live up to their valuations. Fundraising by China-focused venture firms fell by about 50% to about $13 billion, according to Preqin.
“China tech is going global, going mainstream and shaking things up more than ever,” said Rebecca Fannin, founder of technology consultancy Silicon Dragon. “More U.S. startups will follow China business models.”
However, China’s position as factory for the world of technology is in jeopardy. The (mainly Taiwanese) assemblers of the world’s electronics are exploring options beyond China to varying degrees. From Inventec Corp. to Foxconn Technology Group and Quanta Computer Inc., the makers of everything from iPhones to Dell laptops have either moved production back to Taiwan or to further-flung regions around Asia, seeking to escape U.S. tariffs. The idea is that, even if Washington and Beijing strike a trade deal, diversification is essential in the longer term given tensions are unlikely to subside and labor costs will rise.
Even leading Chinese hardware suppliers recognize the risks. In addition, last year’s experience forced Chinese tech workers to come to terms with the new reality.
Many had taken jobs with startups in the hope of cashing in when they debut or get bought. But as that deal-making streak cooled as the prospect of working long hours such as 996, or 9 a.m. to 9 p.m., six days a week, lost much of its appeal.
In March, Chinese programmers on GitHub put together a list of companies known for short-changing their employees on overtime, which led to a greater awareness of the human cost of China’s tech boom.
“What’s changed is the trade war, the talk of decoupling,” said Paul Triolo, head of global technology policy at Eurasia Group. “This has really galvanized the authorities. It doesn’t necessarily mean that they will be more successful. But they’re determined.”
So, we will see. Chinese competition in high tech areas has shocked many in the U.S., at the same time it has strengthened that nation’s demand for many U.S. products, so the implications of trade concessions have the potential to be highly complex, observers say. Clearly, the evolution of any trade deal with China should be watched closely by U.S. producers as the trade policy debates intensify, Washington Insider believes.
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