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China's sugar industry is tasting a sweet bitterness, as the irrationally high price appeases the appetite of some businesses, but alarms the authorities, who fear the trend may thwart the country's efforts to revitalize the industry.
To quench the overheating of sugar prices, which surged from 3,000 yuan (US$361) per ton at the end of last year to its present 4,300 yuan (US$518) per ton in some regions, the country moved more than 1 million tons of its State reserves to the market between August 18 last year and Friday, according to Ma Zhanping, from the State Development Planning Commission.
The effect of the underselling move is yet to be seen, the official said, and his commission has been mulling over putting more sugar on the market this year.
The domestic sugar price, driven up by a strained market supply, is higher than that on the global market, fuelling speculations that the country may increase imports to balance demand.
White granulated sugar, processed from imported raw sugar, is usually sold at 3,500 yuan (US$421.7) a ton in the Chinese market, according to Lian Xuezhi, a senior expert with the China Sugar Association.
But Lian said China's likely increase in sugar imports this year should not result in a price hike in the international market, as anticipated by some foreign observers.
"This is because the odds are low that China will increase sugar imports drastically this year - given its huge stockpiles, and the country will buy gradually, not all at one time," Lian said.
Last year, China registered a net import of more than 200,000 tons of sugar, according to customs statistics.
Both Ma and Lian attributed the high domestic price partly to the manipulation of some sugar enterprises, which have sought to benefit from the market by either balking at selling or stocking up large amounts of sugar.
The rising sugar price, if not curbed, will bitterly affect the country's efforts to cap sugar production capacity and close down redundant facilities in order to stem losses in the sector, according to some analysts.
The sugar industry saw poor results through the four years leading up to 2000, with cumulative losses approaching 10 billion yuan (US$1.2 billion), according to the State Economic and Trade Commission (SETC).
To reverse the situation, the SETC decided earlier this month to close 134 small sugar refineries in various provinces and suspend operation of several glucoside makers in Shanghai and in Liaoning Province.
But tempted by the price sweetening, some chronic money-losing sugar firms or small businesses with backward technology which are already shut down, will rush to resume production, noted Lian.
The price jump may also send a signal to farmers to reserve more acreage for sugar cane and sugar beets, he said.
(China Daily 04/16/2001)
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