China slaps tax on grain exports in bid to boost domestic supply

China slaps tax on grain exports in bid to boost domestic supply
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First Published: Tue, Jan 01 2008. 11 19 PM IST
Updated: Tue, Jan 01 2008. 11 19 PM IST
Beijing/Shanghai: China, the world’s biggest grain producer, will tax exports of wheat, maize and rice to increase domestic supply and control rising food prices.
Wheat exporters will start paying a 20% tax from the first day of the new year, while the tax for maize and rice was set at 5%, the finance ministry said in a statement on its website on Sunday.
The government, concerned that inflation may disrupt social stability, has sought to hold down price increases by selling grain from stockpiles and by cancelling export tax rebates.
Food prices in the world’s fastest growing major economy rose 18.2% in November—spurring a jump to an 11-year high of 6.9% in the consumer price index.
The country “has sent a strong signal that it is determined to keep grain prices under control,” Li Shouchun, research manager at Datong Futures Co. Ltd, said from Harbin on Sunday.
Wheat exports soared 130% in the first 11 months of last year to 2.1 million tonnes (mt), according to customs data on 24 December. Most exports go to nearby Asian countries, and lower freight costs usually help make them cheaper than supplies from other origins.
China exported 4.9mt maize in the first 11 months—up 87% from the same period last year, customs data shows. Rice shipments were 1.1mt, up 5.7%, and soya bean shipments were 401,299 tonnes, up 24%.
The move may force importers of Chinese grains to seek supplies from other countries including the US, Brazil and Argentina.
South Korea is the biggest buyer of Chinese maize.
“Countries such as South Korea and Japan will probably have to depend more on the US,” said Nie Ben, manager of Liaoning Cifco Futures Co. Ltd. South Korea may import 8.8mt of corn, 3mt of wheat and 1.2mt of soya beans from all suppliers in the year ending 30 September, the US department of agriculture said.
China’s decision may help push up prices on the Chicago Board of Trade, the price benchmark for grains. Wheat futures in Chicago have gained 77% last year as global demand outpaced supply—soya beans are up 79% and corn 16%.
The export taxes will be applied until the end of 2008, the finance ministry said.
Taxes on wheat powder are 25%, and taxes on soya bean powder and rice powder are 10%.
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First Published: Tue, Jan 01 2008. 11 19 PM IST
More Topics: China | Tax | Government | Grain | Exporters |