China faces a significant shortage of natural rubber, with approximately two-thirds of its consumption relying on imports annually. Before 2002, the import tariff for natural rubber was set at 25%, but in-quota tariffs were typically collected at around 12%. Since 2002, the tariff has been unified at 20% on paper, though the actual rate has risen to 25%. This fluctuation in tariff rates has sparked widespread debate, particularly after 2002 when global rubber prices surged, leading to increased costs for downstream industries like plastics and tire manufacturers.
The rising import tariffs became a major point of contention between upstream producers and downstream users. While some argued that the 20% tariff was too high and should be lowered, others maintained that it was necessary for protecting domestic interests. The Ministry of Agriculture, in particular, has consistently opposed any reduction, citing the strategic importance of natural rubber and the fragile state of China’s domestic rubber industry.
Domestic production only meets about one-third of national demand, and the industry faces challenges such as outdated infrastructure, low productivity, and unsuitable planting conditions. Additionally, many rubber plantations are located in regions where yields are poor, making the industry economically unstable. Once hit by external shocks, recovery is difficult. Given the government’s focus on rural development and agricultural sustainability, maintaining protective tariffs remains a priority.
In recent months, natural rubber prices have continued to climb, surpassing 16,000 yuan per ton. For tire and rubber product companies, this has meant material costs accounting for nearly 80% of their total expenses. As a result, pressure has mounted on the government to lower import tariffs. The China Rubber Industry Association has formally requested the reduction of the 20% tariff to 10%, arguing that domestic production cannot meet growing demand, especially as the tire industry expands.
Looking at global trends, many countries that lack natural rubber resources or face shortages implement minimal or zero tariffs to encourage importation and use of foreign rubber. For example, South Korea imposes a 1% tariff, while Japan has a zero-tariff policy. These examples suggest that lowering China’s tariff could help stabilize the market without harming domestic producers.
Domestic natural rubber production costs around 6,000–8,000 yuan per ton, and with current rubber prices, profit margins remain substantial. However, the majority of imports come through processing trade, which allows for zero tariffs, or through bonded areas where compound rubber is imported with lower duties. This has led to an increase in compound rubber imports, despite quality concerns and inefficiencies in the supply chain.
Many companies prefer to avoid using compound rubber due to inconsistent quality and difficulties in subsequent processing. Yet, high tariffs on raw natural rubber force them into these less efficient alternatives. If the import tariff were reduced to 10%, most companies would likely revert to importing raw natural rubber, reducing reliance on compound glue and improving overall efficiency.
Despite these arguments, the 20% tariff remains in place. Critics argue that it stifles competition, prevents necessary reforms, and contradicts international trade practices. Some question where the revenue from these tariffs actually goes, as neither producers nor consumers seem to benefit directly.
The China Rubber Industry Association and tire companies agree that the current tariff structure is outdated and counterproductive. They believe it creates market distortions and hinders long-term development. Although the government is aware of these issues, resistance to reform persists, leaving the industry in a state of uncertainty.
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