Arlan Suderman, Chief Commodities Economist at StoneX, discusses how China’s long-term push for economic self-reliance is changing the shape of global trade and challenging US economic strategy.
China is working to rebuild reserves of key commodities like wheat and rice while reducing reliance on imported soybeans and meat. “They hold half of the world’s wheat right now in reserve”, and have adopted genetically modified crops to boost yields. Adjustments in feed rations are also part of this effort, with soymeal in hog feed cut from 17% to around 13%, targeting even lower rates.
The US shipbuilding industry has weakened under pressure from cheaper Chinese labor. “We don’t have a shipbuilding industry that’s strong enough to be able to support building of those ships”, Suderman warns. Both the Biden and Trump administrations have responded by pushing domestic shipbuilding as a national security priority, supported by potential tariffs on Chinese-built vessels.
Despite China's self-reliance goals, its export-driven economy still relies heavily on the US consumer. “China needs to access the $450 billion exports of consumer goods to the United States”. This makes tariffs a viable tool for influencing Chinese policy, with agricultural and energy purchases often used as bargaining chips in negotiations.
China’s efforts to create internal demand through subsidies have come at a cost. “As of March this year, government debt has increased 20% in one year’s time”, Suderman notes, pointing to the financial strain from stimulus programs and state-backed stock market support. China is hoping to outlast trade tensions, but its economic structure may not be sustainable under the mounting debt burden.
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---- Written by Frederic Guetin, StoneX TV Producer
---- Expert: Arlan Suderman, StoneX Chief Commodities Economist
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