China may scrap export tax rebate on corn products

China is considering scrapping the 5% tax rebate on exports of corn starch and alcohol to discourage sales abroad amid tight domestic supply, industry sources said on Wednesday (May 19).

 

The refund on the 17% value-added tax, effective from June 1 last year, was aimed at helping processors maintain production amid the global financial crisis. But last year's lower harvest had led to tight supplies at home, pushing up prices to a record high level in some areas.

 

"The government is discussing this," said one industry source, who declined to be identified.

 

The higher domestic price coupled with expectations of thin supply in coming months have prompted Chinese feedmills and companies to import corn from the US.

 

"Given the current shortage of corn, we believe the government will take such a measure very soon," said analyst Li Qiang.

 

China has also banned bidding by corn processors at weekly government auctions to ensure supplies for feed producers. But the government authority said the state stocks are high with supply exceeding demand.

 

China exported 81,077 tonnes of alcohol or ethanol in the first three months, a rise of 236.4% on-year, customs figures showed. Exports of corn starch fell 39% in the first two months of the year to 31,670 tonnes, official figures showed.