Macro Roundup: Trade War, Soybeans, Philippines Mulls China Loans

On Sunday, China’s state-run Xinhua news agency reported that some Chinese companies are applying to buy U.S. agriculture products to fill supply shortfalls caused by the ongoing U.S./China trade war. The weekend report comes just days after Chinese Commerce Minister Zhong Shan met with counterparts in Russia for talks on closer bilateral trade ties in soybean and other farm products, a follow-on from Russian President Vladimir Putin’s vow to boost the production and exports of Russian soybeans to China.

Meanwhile, commodities giants Archer-Daniels-Midland and Cargill have both issued remarks in recent weeks predicting that the U.S./China trade dispute could permanently shift global trade patterns in soybeans, as China both pursues alternate trade relationships and implements its own program of land reforms to improve crop yields.

Politicians in the Philippines may be rethinking the attractiveness of Chinese capital as they seek to fund further projects in the country’s sweeping “Build, Build, Build” infrastructure program. Speaking with the Philippine Daily Inquirer, Finance Undersecretary Mark Dennis Y.C. Doven said the country will “wait until the point it makes sense”to seek additional loans from the China-backed Asian Infrastructure Investment Bank (AIIB), citing higher AIIB lending rates compared to comparable multilateral financing organizations such as the Asian Development Bank.

Phillipine President Rodrigo Duterte’s signature “Build, Build, Build” program, which seeks to funnel as much as $177 billion into 75 infrastructure projects between now and 2022, is unfolding just as strategic funding has become a new front for geopolitical jostling between the U.S. and China. The Better Utilization of Investment Leading to Development (BUILD) Act, which U.S. lawmakers passed late last year, pledged $60 billion to support infrastructure buildouts in emerging economies in a move to counterbalance rising Chinese clout in the region.

Channel News Asia reported last week that diplomats from the U.S. took advantage of the final day of the U.S./Philippines Bilateral Strategic Dialogue to announce a new push for U.S. private capital as part of “Build, Build, Build,” although further details about the scope and nature of the private capital push were not announced.

To place into further context China’s rising profile in Southeast Asia, Bloomberg reported that the real godfather of regional infrastructure is not China, but Japan, which to date has backed $367 billion in infrastructure projects in Southeast Asia’s six largest economies, compared to China’s $255 billion. In the Philippines alone, Japanese infrastructure investment is roughly six times the level of China’s.