China slaps import duties on sugar

[BEIJING] China said on Monday it will impose hefty penalties on sugar imports after lobbying by domestic mills, but experts said the ruling may not go far enough to stem the flow of lower-priced sweetener into the world's top importer.

The ruling, which will affect about a third of China's annual sugar imports, introduces an extra tariff on shipments over a three-year period, which will fall slightly each year.

In the short term, it will inflict a blow on top growers, Thailand and Brazil, as it will close the big gap between Chinese and international prices. Chinese sugar prices are around double those on the London market.

But traders said the higher tariffs and exclusions will likely lead to increased smuggling across China's porous southern border, while some imports from major producers may be shipped through third-party countries.

The government has also excluded about 190 smaller countries and regions from the penalties, potentially diluting their impact, analysts said. These include some of China's closest trading partners such as the Philippines and Pakistan, both smaller sugar producers.

"Of course it will support the domestic industry for a short time," said a China-based trader. "(But) the global raw sugar market just needs to drop a little below 15 cents" to make it profitable to import into China.

Global raw sugar prices were at 17 cents per lb on Friday.

Sugar futures fell more than 1 percent on the news and were down 0.4 pct at 6,697 yuan (S$1,347) per tonne at 0430 GMT, as traders interpreted the move, which was in line with a draft proposal issued in April, as too lenient to staunch shipments.

China, which imports about 3 million tonnes of sugar a year, allows 1.94 million tonnes of imports at a tariff of 15 per cent as part of its commitment to the World Trade Organization.

Imports beyond this attract a 50 per cent levy. Monday's ruling will add an extra 45 per cent duty to these imports in the current fiscal year, China's Commerce Ministry said in a statement, taking the total to 95 per cent. This will fall to 90 per cent next year and 85 percent a year later.

The move followed a months-long probe after domestic sugar mills lobbied hard for help against cheap imports and rising farm costs.

REUTERS