The signing of the largest long-term liquefied natural gas (LNG) contract between Chinese and US companies could create goodwill ahead of a virtual summit between US President Joe Biden and Chinese leader Xi Jinping, but long-term disagreements over the first deal, analysts say.
According to a statement by the company on its official WeChat channel, China’s state oil giant Sinopec has signed a contract with US Venture Global LNG to purchase 4 million tons of LNG annually for 20 years at a ceremony in Shanghai.
“This is by far the largest long-term LNG deal signed by China and the US,” the state-owned Xinhua News Agency said on Thursday.
Do you have questions about the biggest topics and trends from around the world? Get the answers with SCMP Knowledge, our new curated content platform with explanations, FAQs, analytics and infographics, brought to you by our award-winning team.
In a separate deal, Sinopec’s subsidiary Unipec agreed to buy 3.8 million tons of LNG from the US company, the statement said.
Details of the Sinopec-Venture Global agreement were revealed in documents last month on the US Department of Energy website, but the official signing ceremony took place this week at the annual China International Import Export in Shanghai.
China’s purchase of US energy products is an important part of the first trade deal with Washington, which expires on December 31.
While the new deal is small relative to China’s total LNG imports of 67.1 million tons last year, the deal will be seen as a positive step for US-China relations ahead of a virtual meeting later this year. between Biden and Xi, analysts say.
“China’s performance in implementing the agreement is impeccable,” Zhou Xiaoming, former deputy permanent representative of China’s Permanent Mission to the United Nations office in Geneva, wrote in a commentary for Chinese news portal Guancha.cn on Thursday.
Zhou criticized the US for failing to respond to China’s goodwill in meeting its purchase commitments under the phase one deal.
China has committed to purchasing US$52.4 billion worth of US energy in 2020-21 above 2017 levels.
Sinopec did not link the deals to the US-China trade talks or to the first-stage deal.
“[The deal] demonstrates a high degree of consensus between the two companies to aid global energy transformation, and is instrumental in achieving the carbon peak and carbon neutrality targets,” the Chinese company said.
While China has made progress toward its first-stage commitments, U.S. imports of covered energy products totaled $24.5 billion in September, just 51 percent short of target, according to a report from the Peterson Institute. for International Economics published last month.
The country’s purchases of all U.S. covered goods were also still about 40 percent below commitments, the survey found.
“China may not meet the deadline for the first trade deal,” Lu Ting, chief economist for China at Nomura, said in a note Tuesday.
“Conclusion: lower your expectations of a major brokerage/agreement to cut tariffs between the US and China,” he added.
The trade disputes between the US and China are likely to erupt again, one of the reasons being that the two sides have differing views on the implementation of the phase one deal, Zhou said.
“The current ceasefire may be the lull for a new struggle,” he wrote.
He said Washington now appears to have no intention of entering into second-stage trade talks and that as China’s strength and resilience improves, the US will struggle to achieve the desired results in future negotiations.
Beijing should be wary of Washington taking action again under Section 301, the same statute used by the previous administration to impose widespread tariffs on imports from China, Zhou said.
The Biden administration could also join forces with Western allies to take advantage of World Trade Organization reforms to sideline China in discussions about a new world trading system, he added.
Taiwan could be used to force Beijing to make trade concessions as well, Zhou said.
“Any overestimation of US goodwill towards China will hurt ourselves,” he said.
This article originally appeared in the South China Morning Post (SCMP), the most authoritative reporting on China and Asia for over a century. For more SCMP stories, explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.
Copyright (c) 2021. South China Morning Post Publishers Ltd. All rights reserved.