February 13, 2007

 

China's corn industry risks being in shadow of foreigners
 

 

China risks being overly dependent on corn imports to the detriment of domestic suppliers, an official at a government think tank wrote in an article published on an industry website.

 

The corn industry is in danger of being "controlled" by foreign enterprises, as in the case of the soybean industry, wrote Jiang Changyun, a researcher at Industrial and Technological Economy Research Institute, in an article published Tuesday on a corn industry website backed by the Jilin government.

 

Jilin is China's largest corn-growing province.

 

But the problem would be less severe for the corn industry, with China's corn demand largely depending on domestic supply, Jiang said.

 

China is currently a net exporter of corn, controlling imports of the grain with a quota system and high tariffs.

 

The country imposes a 1 percent import tax on corn and an import quota of 7.2 million tonnes. A 13 percent value added tax is also levied on corn imports. For imports of the grain outside the quota scheme, the import tax is a lofty 65 percent.

 

In contrast, only a 3 percent tariff is imposed on soybean imports.

 

Last year, China exported 3.07 million tonnes of corn, down 64 percent from 2005, and imported just 65,217 tonnes of corn, mainly from the US.

 

China should adjust its macroeconomic policies to protect the soybean industry, Jiang said.

 

A production overcapacity in the soybean processing industry has resulted in many domestic enterprises being acquired by international companies.

 

Cargill Ltd, along with other international agricultural commodities traders including Archer Daniels Midland Co, Bunge Ltd. and Louis Dreyfus Group, is responsible for more than 80 percent of China's soybean imports.

 

China is a net importer of soybeans. In 2006, it imported 28.27 million tonnes of soybeans and exported 379,004 tonnes.

 

The government should support the soybean industry with the help of intermediaries such as banks and industry associations, Jiang said, without elaborating.

 

The Industrial and Technological Economy Research Institute comes under the National Development and Reform Commission, the nation's top economic planning body.