China Launches Investigation on Sugar Imports
The Ministry of Commerce of China has recently opened a six-months safeguard investigation on the imports of sugar, as the country struggles to distribute excessive sugar reserves. During the investigation, the Chinese government will look at imports since 2011 and into possible protectionist measures provided by foreign countries for their producers. Brazil, Thailand, Korea and Australia are some of the countries that are being targeted.
The investigation was opened at the request of the members of the local Chinese sugar industry arguing that rapid import growth of 663,15% in sugars between 2011 and 2016 caused numerous problems for the local sugar industry.
The Chinese government policy on establishing minimum prices to sugar led to an increase of the domestic prices above international levels. High domestic sugar prices incentivized a flow of imports to the country. In order to help the domestic production, the government bought a great quantity of overpriced sugar and created reserves of the product. Estimates are that China has accumulated a total of 7 million tons of reserves. The investigation is taking place at the time when China is preparing to sell a part of its sugar reserves.
Simultaneously, the protectionist policy on the Chinese sugar has stimulated smuggling of sugar into the country, and according to the data of the U.S. Department of Agriculture, more than 1.5 million tons of sugar were smuggled into China just in 2015.
It is becoming certain that China will have to reevaluate its policies regarding the minimum prices of sugar and the sugar reserves. Protectionist policies related to sugar producers might not be the right solution.