The impact of international economic and financial turmoil on China’s agricultural trade explored

　　Since June this year, the international financial market has tumbled, the commodity market has been unusually volatile, and the stock markets of emerging market countries, represented by China, have fallen sharply and heavily, casting a shadow over the prospects of international economic and trade recovery.

　　New changes in the international economic and financial situation

　　Recently, influenced by factors such as the Fed entering the interest rate hike cycle, China’s economic slowdown and concerns about the decline in global economic growth potential, the international financial environment has become more volatile, bringing many unpredictable factors to the world economic and trade recovery. Influenced by the Fed’s interest rate hike expectations, the U.S. dollar index has been on a fast track to rise since the second half of 2014, touching a low of 79.77 on June 30, 2014 to 98.33 on August 31, 2015.

In contrast, the international commodity market in the same period is cloudy, woe is me, gold prices from the high point of $1232 / ounce in May this year all the way down to the low of $ 1072 / ounce on July 24, after hovering around $ 1100 / ounce, down more than 10%, crude oil prices from the beginning of June this year nearly $ 60 / barrel all the way down to the beginning of August has less than $40/barrel.

In July this year, the FAO statistics of the global food price index was 164.6, down 19.4% year-on-year; CBOT soybean recent futures contract recently closed at an average price of $372 / ton, down 19.6% year-on-year; international cotton index average price of $1662 / ton, down 13.9% year-on-year.

　　Since June this year, the RMB has changed its previous appreciation trend and accelerated its depreciation, with the index of the USD against the RMB depreciating from 62010 on June 30, 2015 to 6.4110 on August 26, a 34% downward adjustment; in particular, the mid-price of the RMB against the USD was 62298 on August 11, plunging 1,136 basis points from the previous trading day, a drop of 18%, the The biggest drop in history and a new low since April 25, 2013. China’s A-shares slid from 5178 on June 12 all the way to 2851 on August 26, a drop of nearly 45%.

　　Regarding the future direction of the international financial economy, relevant experts gave three judgments: First, the Fed’s interest rate hike is an inevitable trend. Significant improvement in important economic data will prompt the Fed to firmly withdraw from quantitative easing and the implementation of interest rate hike policy determination.

In August this year, the U.S. unemployment rate has fallen to 5.1%, July to remove energy and food prices after the core CPI rose only 18% year-on-year, the second quarter economic growth rate of 3.7%, higher than the market expectations, the U.S. economy continues to improve to enhance the Fed’s bottom line to raise interest rates. Second, the developed countries’ economic weakness is difficult to change.

The second quarter, the eurozone economy zero growth, Europe’s largest economy – Germany’s economy shrank 02%, the French economy has been two consecutive quarters of negative growth; Japan’s second quarter real GDP growth of 0.6% compared to the previous quarter, lower than the market’s general expectations, “Abe economics” has become the end of the strong. Third, the economic downside risks of emerging market countries have increased.

Since this year, the overall economic performance of emerging market countries is much lower than expected, international investors have doubts about whether China can complete the annual target of 7% economic growth, especially the U.S. interest rate hikes will lead to increased capital outflows from new market countries, which will lead to increased downside risks in the economies of emerging market countries and increased volatility in financial markets.

　　On August 28, Premier Li Keqiang specifically on the recent new changes in the international economic and financial situation on the impact of China’s economy and countermeasures held a special meeting of the State Council, it is reported that this is the first time since the establishment of the current government held a special meeting of the State Council. Premier Li Keqiang pointed out at the special meeting that the RMB exchange rate has no basis for sustained depreciation and can be maintained at a reasonable and balanced level of basic stability. It is necessary to strengthen and improve risk management and hold the bottom line of no regional systemic risk.

　　Analysis of the impact on China’s agricultural trade

　　The new changes in the international economic and financial situation have been transmitted to the field of China’s agricultural trade, especially the accelerated devaluation of RMB, which has shrunk China’s agricultural trade deficit and to a certain extent made China’s agricultural trade environment improve, while enhancing the international competitiveness of China’s advantageous agricultural products and stimulating the export of China’s advantageous agricultural products.

　　According to statistics, from January to July this year, China’s agricultural imports and exports of 107.6 billion U.S. dollars, down 6.7% year-on-year, of which, exports of 38.5 billion U.S. dollars, down 3.3% year-on-year; imports of 69.1 billion U.S. dollars, down 8.5% year-on-year; trade deficit of 30.6 billion U.S. dollars, down 14% year-on-year. In recent years, China’s agricultural trade balance is increasing trend, the reduction of the trade deficit makes China’s agricultural trade environment has been improved to a certain extent.

　　At the same time, China’s exports of vegetables and other advantageous agricultural products increased. From January to July this year, vegetable exports of $7.38 billion, up 50% year-on-year, imports of $310 million, down 5.1% year-on-year, the trade surplus amounted to $7.07 billion, up 5.4% year-on-year.

　　In recent years, as China’s agricultural imports increased a lot of the fundamental motivation lies in the price difference between domestic and foreign agricultural products drive, with domestic agricultural production costs due to rising labor costs and other factors, domestic and foreign agricultural product price difference will expand, coupled with China’s free trade zone strategy continues to promote, China’s agricultural trade imports will remain at a high level in the longer term; China’s agricultural exports are subject to the world economic growth downturn China’s agricultural exports are affected by the low growth of the world economy and the lack of demand growth momentum, and the growth space is limited and unsustainable.

Therefore, in the long run, the new changes in the international economic and financial situation on the overall impact of China’s agricultural import and export trade will not be too great.

　　Affected by the new changes in the international economic and financial situation, China has now appeared capital outflow phenomenon. The impact of this will increase the difficulty of China’s agricultural “going out” enterprises in emerging market countries to finance, reduce their investment income, but because China and emerging market countries generally signed bilateral local currency swap agreements, so the overall impact is expected to be limited. A phenomenon that we need to be alert to is that some countries have started to increase restrictions on foreign capital investment in agriculture.

For example, some local governments in Russia have changed the land leases originally signed with our northeastern agricultural enterprises to ownership re-contracting, which is equivalent to raising land prices in disguise, and countries such as Brazil have also started to set restrictions on issues such as land purchases. The new changes in the international economic and financial situation are expected to worsen the international environment for China’s agricultural “going out”, and we need to pay great attention to and actively respond to them.

　　Policy Suggestions for Coping with International Economic and Financial Turmoil

　　In the face of the sudden international economic and financial turmoil, we need to stabilize our position and actively respond. Implement the spirit of the State Council special meeting, focus on the following aspects of the work.

　　1. To establish bottom-line thinking, adhere to the “basic self-sufficiency of grains, absolute food security” strategic bottom line.

In the past national economic development, food “eleven consecutive” played a “pressure stone, stabilizer” role. Facts prove: three agricultural good, the whole situation initiative. General Secretary Xi Jinping recently in Jilin research, stressed that at no time can we forget the farmers neglect agriculture indifferent rural areas. Regardless of how the international storm clouds change, we must not waver in the implementation of the new national food security strategy, urgent around the “stable food and income adjustment structure, the system to increase efficiency and turn the way” the main line of work, and constantly improve the comprehensive production capacity of food, adhere to the “basic self-sufficiency of grain, absolute food security “The strategic bottom line.

　　2. To multi-pronged, integrated approach, the formation of policy synergies.

Properly respond to the international economic and financial turmoil, the People’s Bank of China, the Development and Reform Commission, the Ministry of Finance, the Banking Regulatory Commission and other relevant departments to strengthen coordination and cooperation, consensus, break the barriers of sectoral interests, comprehensive policy, the formation of policy synergies, building a strong line of defense against international financial risks.

　　3. We should take the initiative and strive for influence and discourse in the field of international food and agriculture.

After the international financial crisis in 2008, the international trade and investment pattern and the global economic and trade rules system are still under reconstruction, providing a rare strategic opportunity for China’s agriculture to “go global”. We should seize this once-in-a-lifetime opportunity to participate in the development of rules in the field of agricultural investment and trade, and enhance the influence and voice of China’s agriculture in the field of international food and agriculture.

　　4. We should accelerate the construction of multinational agricultural enterprise groups and improve our core competitiveness.

As early as the Central Rural Work Conference at the end of 2013, General Secretary Xi Jinping made it clear that “with such a large domestic market, we should have the confidence to build our own big international grain merchants.” The 2015 Central Document No. 1 also proposed, “Accelerate the cultivation of internationally competitive agricultural enterprise groups.

“Throughout the world’s agricultural powerhouses, all have their own famous multinational grain merchants, who play a vital role in ensuring their food security and economic safety. We should be determined and make a strong effort to firmly focus on cultivating several multinational agribusiness groups and encourage them to actively allocate resources and manage their operations globally.