China Cuts Its Import Tariffs on Refined Oil: Zero Tarrif

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According to a notification issued by Ministry of Finance, China will substantially reduce the import tariffs on gasoline, diesel, aviation kerosene and fuel oil, among which diesel and aviation kerosene will even be listed as zero-tariff.  

Ministry of Finance said the aim of the tariff cut is to further expand imports of advanced technology and equipment, key components, energy resources and raw materials, to strike a balance in foreign trade, to guarantee a steady operation of domestic economies, and to strengthen the construction of domestic disaster relief system and emergency supplies reserves system.

Picture source: westernjournalism

It is reported that this tariff cut involves a total of 33 items of products, mainly resources and raw materials. It is another strong tariff reduction measure implemented after the relatively low provisional import tariff implemented earlier this year on over 600 items.  

Liu Heng, Vice Dean of School of Taxation in the Central University of Finance and Economics, said that by substantially reducing import tariffs on energy and raw materials, we can maintain a balanced foreign trade, improve the energy agencies and lower the cost of domestic enterprises.

According to Liu Heng, lowering import tariffs is necessary for the Strategic Adjustment of China's foreign exchange reserves. China's foreign exchange reserves have exceeded $ 3 trillion, and foreign exchange reserves are often related to asset allocation. At present China's foreign exchange reserves are mainly used for purchasing foreign government bonds, government agency bonds and other virtual assets. Therefore, we should adjust the proportion of investment between the virtual and the real assets. Reducing import tariffs on energy and raw materials will help improve the ratio of real assets.

Besides, energy plays an important role in economic development. With the rapid economic development, China has already changed from an energy-exporting country into an energy-importing one. Its energy imports are huge, 50% of which are oil imports.

In addition, energy is likely to become the bottleneck of China’s future economic development. Therefore, we need to adjust the energy structure, the use of foreign sources of energy to supplement domestic energy needs. And in this case, lowering import tariffs will help improve the energy structure.

Unexpected tariff cuts may be made for preventing oil shortage

Currently in the domestic market, refined oil is not in short supply. And the wholesale price of refined oil also showed a slightly downward trend. Therefore, people feel a bit surprised to hear that yesterday import tariffs on a variety of oil products had been lowered.

Refined oil Analyst in CBI said that it is a huge move to list Diesel and aviation kerosene as zero-tariff items. Before, the tariff rate on aviation kerosene was 9%. Through implementing tariff cut, China hopes to use import as an alternative to make up for domestic kerosene demand, and also hopes that the fineries in China could lay more emphasis on producing gasoline and diesel, especially diesel. According to him, this tariff reduction policy is also provisional: July has always been the peak of domestic oil refinery overhaul, so these tariff cuts may be made in order to prevent the possible “oil shortage”.

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