China Asks State-Firms to Halt Purchases of US Farm Goods

China told state-owned firms to halt purchases of soybeans and pork from the United States (U.S.) after Washington decided to eliminate special treatment for Hong Kong to punish Beijing, two people familiar with the matter told Reuters.

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"China has asked main state firms to suspend large scale purchases of major U.S. farm products like soybeans and pork, in response to U.S. reaction to Hong Kong," one of the sources said.

Large volume state purchases of corn and cotton from the U.S. have also been put on hold, according to the sources who added China could expand the order to include more U.S. farm goods if Washington took further action.

U.S. President Donald Trump said Friday he would eliminate special treatment for Hong Kong, ranging from extradition treatment to export controls, in response to China's plans to impose new security legislation in the territory.

Following Trump's comments, Chinese importers have canceled 10,000 to 20,000 tonnes of American pork shipments - equivalent to roughly one week's orders in recent months - the sources said.

In a worst-case scenario, if Trump continues to target China, Beijing will have to scrap the phase one trade deal.

"There's no way Beijing can buy goods from the US when receiving constant attacks from Trump," another source familiar with the government plan said.

China pledged to buy an additional US$32 billion worth of U.S. agriculture products over two years above a baseline based on 2017 figures, under the initial trade deal the two countries signed in January.

The country has bought soybeans, corn, wheat, and soy oil from the U.S. this year, to fulfill its commitment under the trade deal. Beijing also stepped up purchases of U.S. pork, after the African swine fever decimated its pig herd.

Private importers haven't received a government order to suspend buying of U.S. farm produce, according to a third source with a major trading house, but commercial buyers are very cautious at the moment, the person added.

"A certain scale of trade will be halted," given rising tensions between China and the U.S. in other areas, but it is not a full stop, said a fourth source familiar with the government plan.