January 14, 2005

China Awaits Official Announcements on VAT Waiver of Wheat Imports and 2005 Corn Export Quota

According to stipulations from China National Development and Reform Commission (SDRC), Ministry of Finance and State Administration of Taxation, the value-added tax (VAT) waiver for wheat import has expired at end 2004.  If the waiver is not continued, the cost of imported wheat arriving at Chinese ports will rise by 13%. 

An illustration: If US soft red winter wheat is offered at USD 228 C&F China, the import cost with the waiver in place stands at RMB 2,026/ton. However, the cost increases to RMB 2,275/ton - a price differential of RMB 249/ton - if the waiver is discontinued.

China imported around 7.5 million tons of wheat in 2004, compared with only 0.42 million tons in 2003.  Total wheat imports from 1997 to 2003 registered just 6.39 million tons, while imports of wheat were at a high of 8.25 million tons in 1996.

News that China will increase its corn export quota for 2005 has been circulating in both the domestic and overseas markets in recent weeks. Although the relevant authorities have yet to make an official announcement on the corn export quota, it has already been confirmed that the quota this year will be higher than that of 2004.