October 1, 2003



China's New Quotas On Some Grain Imports


China this week announced the allocation of tariff rate quotas, or TRQ, for the import of grains for 2004, among other items, but trade participants said Wednesday actual imports will again likely fall short of stated TRQ volumes.


Being a major grain producer with a focus on self-sufficiency, it will take some time before China's grain markets open up to more imports, said participants. World suppliers won't be guaranteed better access to China any time soon, they said. Some traders also say that this year's TRQs and even 2004's also won't be fully utilized.


Earlier Wednesday, China's State Development and Reform Commission announced the TRQ volumes for grain and cotton imports for 2004. The TRQ volume for wheat is 9.636 million metric tons, with 90% reserved for state- owned trading companies while the TRQ volume for corn is 7.2 million tons, with 60% reserved for state-owned companies.


As a member of the World Trade Organization, China has said it will allow more foreign goods, including farm products, into the country by importing through a low tariff rate quota system. Imports up to the quota amount are charged a low tariff rate, but that rate rises sharply once the quotas are exceeded.


Overall, the TRQ for 2004 grain imports is larger than that in 2003. In 2003, the TRQ was 9.052 million tons for wheat, 6.525 million tons for corn and 4.655 million tons for rice. However, going by China's imports so far this year, the 2003 TRQ targets are unlikely to be met by the end of this year.


Chinese customs data show China imported only 200,462 tons of wheat in the first eight months of 2003, and only 190,385 tons of rice and 32 tons of corn. In the 2002 calendar year, China imported 604,572 tons of wheat, 236,188 tons of rice and 6,322 tons of corn.


Imports Won't Be Anywhere Near TRQ Targets


"So what if the TRQ volume is bigger next year (2004). The question is whether China will import...If you grant a 5,000-ton import quota to a Chinese buyer, how do you expect him to import such a small amount? And China is such a big country. How do you expect him to find other buyers to make a bigger cargo" that is feasible to import, said a second Singapore-based trader.


Traders said the Chinese authorities have made it almost impossible for some Chinese buyers to import grains by issuing quotas of such small volumes that make imports difficult.


"Sometimes, they grant the quotas to some small Chinese buyer sitting in the interior of China who doesn't need to import," said the second trader. Some traders said China may increase grain imports in 2004 from 2003 levels, as the country faces smaller output and shrinking stocks for crops like corn and wheat.


In 2004, a bigger share of corn TRQs reserved for private companies also bodes well for imports, since private companies have greater freedom in trading than state companies.


A higher domestic demand for high-quality wheat, the domestic supply of which remains inadequate, is also seen boosting wheat imports, said traders. Still, grain imports in general won't be impressive and probably won't reach anywhere near the TRQ targets, at least for next year, traders added.

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