Impacts from Guarantee Measures

By CnAgri2017-06-05 10:47:36 Print

There shall be a number of impacts both to the domestic and foreign markets.

(1) Domestic raw sugar processing companies may face a raw material crisis. High tariff would result to a substantial hike of processing cost, processing will have no profit to make or there might even be a deficit to generate. The 15 million tons raw sugar processing capacity would become idle. Large processing companies already started to look for other options, for example Rizhao Lingyunhai is setting up a plant in Inner Mongolia for beet sugar processing; Shandong Xingguang Group and COFCO Sugar signed a strategic cooperation agreement for relying on the latter’s trade advantage.

(2) There shall be a sharp decline of raw sugar import from Brazil or Thailand. Brazil is a key supplier, it made up 74% of China’s total raw sugar import. The guarantee measures shall directly limit import from Brazil.

(3) The most stringent limitation could lead to rampant smuggling. When import through normal trade channels is restricted but there is high profit lure, law breakers would dare to take the risk and cross-border smuggling shall rise. Also, smuggling is mainly from Vietnam, Myanmar or Laos, through Yunnan or Guangxi the cargo would flow into other parts of the country. The guarantee measures exclude these countries, or in other words sugar can be imported from these countries without more tariff, it is legal for these countries to export sugar to China and hence they may become the transfer stations of sugar from Brazil or Thailand.