How Much Does Restoring the Export Tax Rebate Policy Affect the Corn Market?

On August 22, the Ministry of Finance issued an announcement that, with the approval of the State Council, starting from September 1, 2016, the value-added tax export tax rebate rate for corn deep-processing products such as corn starch and alcohol would be restored to 13%. Restoring the export tax rebate helps reduce export costs and absorb excess domestic production capacity.

In 2009, such a policy was already implemented domestically, with the aim of stimulating and boosting exports of corn deep-processing products, except that the export tax rebate at that time was 5%, and it was canceled in July 2010. It was not until 2015 that the government increased its efforts, raising the export tax rebate to 13%. During 2015, the export tax rebate was continuously in effect, and it was canceled on January 1, 2016.

Since 2008, China's corn starch imports have shown a gradual decline. In 2015, China's starch exports were only 74,000 tons, and in 2014 the export volume was 56,000 tons, down from more than 400,000 tons in 2008 to less than 100,000 tons at present. According to data, in 2015 China's annual starch consumption exceeded 19 million tons, and exports accounted for less than 0.4% of that. The tax rebate is only one part of the cost, and attention also needs to be paid to the entire raw material cost and finished product price. Otherwise, even with an export tax rebate, if corn costs remain high, for example, the increase in corn starch exports in 2015 was relatively small.

At present, the short-term impact of restoring the export tax rebate for deep-processing products may not be obvious. On the one hand, domestic corn prices are higher than international corn prices, and product exports are still less competitive compared with traditional exporting countries such as the United States; on the other hand, not many domestic corn starch enterprises have export qualifications, while Thailand's cassava starch exports continue to increase, creating resistance to China's exports of deep-processing products.