March 29, 2011

China unlikely to cut farm tariffs in near term

China has no immediate plans to cut taxes on imports of agricultural commodities, according to a government official who has direct knowledge of the situation, dispelling market rumours of an imminent tax cut to encourage farm imports.

The country turned into a major buyer of US corn last year, having largely stayed out of the market for more than a decade, and many traders expect it to buy more in 2011 to fill the gap between its own production and the massive demand for animal feed and processed corn products.

China is expected to help meet demand by cutting taxes on imports on a range of goods including agricultural commodities, sources said in February and a vice minister of commerce confirmed earlier this month.

Normally the tariff commission of China's Ministry of Finance would hold a meeting in April or May to discuss any changes to the tariffs effective from July 1. Another meeting in September or October would draft tariff changes as of January 1, the source said.

Although temporary adjustments to import taxes could be implemented rapidly and on an ad-hoc basis, the proposed change to the longer-term tax regime would only be made at one of the regular meetings.

So far there has been no conclusion or agreement on the proposal for agricultural goods, although a document has been issued to encourage state owned companies to import manufacturing machinery and high-tech products, the source said.

Last Friday, the USDA reported its sixth-largest single-day corn sale ever, with 1.25 million tonnes going to an unspecified buyer widely believed to be from China.