China/ U.S. Trade Deal: China Coming Up Short
Last January China agreed to buy an extra $200bn (£146bn) in US imports over the next two years, as well as strengthen intellectual property rules. In exchange, the US was to cut the new tariffs it had imposed on Chinese products by half on a $120 billion worth of Chinese goods, reducing the rate to 7.5%.
The $200bn agreed to was based on 2017 levels and applied only to specific categories of goods. US data shows that China purchased $130 billion in U.S.goods in 2017 and an additional $560 billion in services.
At the time, the agreement was seen as the first stage of a deal meant to settle the trade war between the world's largest economies. Chinese leaders described the pact as a "win-win" that would promote better relations between the two nations. US President Trump said the agreement would be "transformative" for the US economy and would help to protect US workers.
However, it now looks like China is falling short of its commitment.
According to the Petersen Institute, the latest number from Chinese customs confirms that China imported just under $135bn from the US in 2020, 58% of the committed amount. Petersen Institute's analysis estimates that China would need to purchase $173bn worth of goods to meet the requirement.
Meanwhile, due to the global pandemic and the resulting surge in demand for medical goods and WFH equipment, China's US trade deficit has skyrocketed. According to Chinese customs figures, China exported almost three times as much as it imported from the US in December.
As the agreement included only manufactured, agricultural and energy products, approximately $35bn worth of goods didn't count, bringing the total applicable under the agreement to $100bn. China imported 60% of its original target for manufactured products, 64% for agricultural products and 39% for energy products.
Chief commodities economist for StoneX, Arlan Suderman, believes part of China’s reason for coming up short is that many of those purchases made were earlier in the year when commodity prices were lower. “That’s one of the big mistakes that China made was agreeing to a dollar value rather than a tonnage value,” he said. However, Suderman also believes China’s indifference to the pact is another reason for the shortfall. “I really don’t think China is paying a whole lot of attention to it,” said Suderman.
Coupa Launches US$50 Million Ventures Fund
Operational resilience and agility. Following the events of the last twelve months, companies have focused on these strategic areas like never before. Some, as we’ve noted, have started to wonder whether this trend will continue post-pandemic—or will we go back to the same old supply chain? Not if Coupa Software has its way.
Last week, the company launched Coupa Ventures, a global fund that will invest US$50mn in early- and growth-stage companies that target business spend inefficiencies. “Coupa Ventures enables us to invest in a future where businesses and their suppliers can harness the power of their spend to constantly adapt, transform, and innovate”, said Rob Bernshteyn, Coupa’s Chairman and CEO.
What’s Business Spend Management (BSM)?
Let’s be honest, it doesn’t sound particularly sexy—it sounds like a subsection of the finance department. But business spend management, together with ERP (enterprise resource planning), CRM (customer relationship management) and HCM (human capital management) make up the core operating process of any company out there. When companies spend money, sign contracts, analyse supplier costs, take inventory or budget for the future, that’s BSM. Overall, business spend management is made up of three main areas: procuring materials, managing invoice, and handling expenses. Essentially, it’s the engine of the entire operation.
Why Change It Up?
According to Coupa, the next wave of BSM is now. It wasn’t always this way: in March of 2016, advisory giant Gartner claimed that BSM was dead. At that time, the firm was partly right. Companies couldn’t handle trillions of bits of data by themselves—and they were sinking as the waves of big data swept over their heads.
But recent developments have meant that BSM isn’t fated to die just yet. “The key to optimisation is data—and not just any data”, Coupa stated. The company has supported community intelligence, in which machine learning uses anonymised data from hundreds or thousands of client companies to suggest better spend tactics. This way, companies can get better insight into their suppliers, track supply chain disruptions, and investigate procurement alternatives.
This network effect is part of what makes Coupa Ventures so exciting. Said Eric Christopher, co-founder and CEO of Zylo, “We’re excited to join an expansive ecosystem of customers, suppliers, and partners”.
First Companies in the Ventures Portfolio
- Zylo, a leading SaaS management platform that helps companies manage cloud-based applications, offers visibility into what software is being used, how much is present, and how a company can optimise its software investments.
- SourceDay, a leading supply chain performance solution, bridges the gap between a company’s enterprise resource planning (ERP) and its supply chain network.
At SourceDay, Coupa’s investment is heralded as a chance for the company to really take off. “The investment from Coupa Ventures will...enable our joint customers to save money and leverage supplier performance as a competitive edge”, said Tom Kieley, SourceDay CEO. “We’re honoured to expand our relationship with the Coupa ecosystem”.
Looking ahead, Coupa will capitalise on community intelligence to help its partners make smarter spending decisions. “[Organisations will] place bets on which investments will quickly pay off to accelerate their growth and resilience in the post-pandemic economy”, said J.J. Freitag, senior vice president of Corporate Development at Coupa. “[And] we’re looking to back the best ideas across Europe and beyond to help businesses build back even stronger”.