China will tax grain exportersNow I don't want to panic anybody but that is quite an extraordinary act. Think about it for a moment, we in the European Union are currently subsidising the Common Agricultural Policy to the tune of dozens of billions a year, meanwhile China is introducing export taxes on grain... of up to 25%. Now the Chinese don't do things by accident, and I suspect that though they claim this move to be temporary, so was the income tax, in 1799.
China is to introduce taxes on grain exports in the latest attempt to rein in food-driven inflation that reached an 11-year high in November.
Exporters of 57 types of grain, including wheat, rice, corn and soya beans, will have to pay temporary taxes of between 5 and 25 per cent, the country’s Ministry of Finance said on Sunday.
This will be a global trend... but higher food costs too. In 2007, wheat prices doubled - with the price of other crops like cocoa and coffee also jumping.
Next year, the growing - and increasingly wealthy populations of the developing world will keep global food demand rising. Global supplies - hit by more droughts, floods and the increased use of land for bio-fuel production - will struggle to keep up.
That's why, in 2008, high food prices will replace expensive oil as the bogeyman of Western consumers and central bankers. Because food accounts for a large portion of disposable incomes, escalating food prices will seriously dent consumer confidence next year, while preventing deep base rate cuts.