More businesses shift from exports to home market
Updated: 2008-02-28 17:29
Wenzhou Ouhai Xingda Flour Co Ltd, a pillar enterprise in the cereal sector in the eastern Jiangsu Province, suspended exporting flour as it neared 2008, said Zhu Yihuai, manager of the business. Following on his heels were a list of major flour mills in the province that exported substantive amounts in 2007.
The suspension was stimulated by the promulgation of three policies meant to curb grain exports boosted by climbing international prices, and to stabilize domestic food prices.
On December 20, the Ministry of Finance (MOF) decided to scrap export rebates for 84 agricultural products to discourage exports and to ensure the domestic supply of farm produce in the nation where food prices drove inflation to an 11-year high of 6.9 percent in November. The products included wheat, oat, maize, paddy, rice, broomcorn, soybean and their powdered byproducts.
Prior to the scrapping, export rebates for grain were 13 percent. The move would be conducive to regulating the import and export of grain, and the export growth would somehow slow, observers said.
One week later, to prevent the country from importing high international grain prices and to rein in surging domestic prices, the MOF said it would levy export taxes on wheat, corn, rice, soybeans and various processed grains in 2008. The export tax rates would range from 5 percent to 25 percent and affect 57 types of grain and grain products.
On January 1, China started a temporary-quota policy on the export of wheat, corn and rice powder to guarantee an adequate domestic supply.
"Global staple food supply has been tightly balanced," said Liu Longheng, a Beijing University tax law professor. "China must give priority to feeding its 1.3 billion people. It is natural for the government to control grain exports. It is even likely to take further measures to harness exports of processed grain products."
As the local market calls for a greater supply of grain, Zhu Yihuai rushes about the cities of Hangzhou, Zhoushan and Fuyang, the leading grain markets in Zhejiang, to sell off his stored grain to private grain merchants.
"It is the peak season for grain. Private grain sellers compete vigorously for sources of goods. We are in a good position to sell grain at good prices."
Zhu, who is in high spirits, also visits grain shops and supermarkets in a spate of cities and counties to promote his brand as a grain agent. He has even extended orders to the neighboring grain producing provinces of Jiangsu, Anhui, Jiangxi and Shandong to set up steady supply-and-demand relations.
As shown in the Purchasing Managers' Index, an indicator of the economic health of the country's manufacturing sector, in January China's export orders index shrank for the first time in the past three years. Its export growth was expected to drop to 18 percent in 2008, compared with 25.7 percent in 2007.
Industry experts welcomed the trend that more export-oriented businesses have returned to the home market.
"The accelerated return of export-based enterprises, particularly those in the CPI-weighted textile and grain sectors, will undoubtedly help stabilize domestic prices and ease inflation worries," said Zhang Xiaoyu, an international market research fellow from the Ministry of Commerce.
However, sales in domestic market will not always enjoy a royal road. According to Zhang Yang, the Zhejiang knitwear exporter, to sell products in the home market his business had to go through complex examination and approval procedures to change from its previous corporate identity of an enterprise dedicated to processing materials supplied by clients to a common Sino-foreign joint venture.
It must also tap into the mid- and high-grade home markets with high quality and added values.
"The Chinese market is no smaller than the EU and the United States. We may first cultivate our own brand by boosting our business on the domestic retail market. After that, we will export products under our own brand," the garment baron said.
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