February 18, 2011

 

China mulls import tax cuts to counter food inflation

 

China's Ministry of Commerce (MOC) has asked other ministries to consider potential cuts in import taxes on a range of goods including food such as soy, in a move aimed at taming rising inflation.

 

Speculation on which import duties could be cut reverberated through domestic and overseas agriculture markets. Soy prices fell on talk of the possible cuts.

 

MOC was hoping to encourage imports of resources and hi-tech goods that China lacks, according to sources.

 

Details are still being discussed by the various ministries and the final plan will need to get the go-ahead from China's cabinet before it could become reality, sources said.

 

If China acts, it will join countries such as Bangladesh that have cut import duties on edible oils to stabilise domestic prices amid soaring global food costs.

 

Taiwan on Thursday (Feb 17) was also considering reducing the sales tax on staples such as wheat, barley, corn and soy to hold down prices.

 

China may be gearing up for more soy imports, given that its order barring major crushing plants from raising retail prices of edible oils is due to expire at end-March.

 

The Commerce Ministry has estimated that China would import 3.1 million tonnes of soy in February, increasing the forecast from its previous 2.7 million tonnes.

 

"The market is talking about a large cut in the import tariff on soyoil, which may lead to more imports," analysts said.

 

China crushes a significant portion of its soy to make soyoil. If import duties on soy or soyoil were cut, it would probably dampen domestic price increases.

 

Analysts predicted China may cut the soy import tax to 1% from 3% and that the soyoil import tax would be cut to 5% from 9%.