Unexpected tariff hike affects China-Kazakhstan relations

Wheat woes will hit Kazakhstan in the second half of 2024. An overabundance of the country’s main agricultural export is expected to keep prices low. Compounding the challenges, Kazakhstan has suspended wheat exports to China indefinitely following unilateral tariff changes by Beijing.

Ministry of Agriculture of Kazakhstan reported that “more wheat has been sown than expected” this spring, meaning that the coming weeks should produce “a large crop and, consequently, low prices.” In the same statement, the ministry announced the suspension of wheat exports to one of Kazakhstan’s major markets, China, due to “unilaterally changed import rules.”

“It will take time and effort for traders to resume trade” with China, the ministry statement added.

China reportedly did not provide Kazakh officials with an explanation for the sudden change in tariffs. On August 2, the agricultural news portal Eldala.kz, citing sources on the ground, provided the first hint of trouble for wheat exports, reporting that “Chinese customs have completely banned wheat imports for factories” in a special economic zone (SEZ) in western China’s Xinjiang province, which borders Kazakhstan.

Previously, Chinese companies registered in this SEZ imported wheat without paying a 65 percent tax that applies in other regions of China. Now, this trade advantage seems to have been reversed. Currently, grain can be imported duty-free only according to quotas distributed among Chinese enterprises by a state-controlled regulatory agency.

Changes in the tariff regime seem to have caught Chinese traders in Xinjiang off guard. Faced with a huge and unexpected increase in costs, Chinese traders told their Kazakh counterparts that they “will not be able to accept wheat cargoes from Kazakhstan, even if they are already on their way,” according to the Eldala.kz report. The press also reported that the tightening measures only affect wheat, while tariff rules for other grain products such as barley, bran and flax are unchanged.

The suspension of exports to China, combined with the projected bumper harvest, is already causing a drop in wheat prices in Kazakhstan. Kazakh farmers now expect to be left with large wheat surpluses.

China’s tightening of tariff rules came just over a month after a meeting between Kazakh President Kassym-Jomart Tokayev and Chinese leader Xi Jinping in Astana. Upon his arrival in the Kazakh capital, Xi described Sino-Kazakh relations as “a unique, permanent and comprehensive strategic partnership”.

On July 3rd press conference together with his Chinese counterpart, Tokayev optimistically described the future of agricultural cooperation with China, noting the strong expansion of exports to China in 2023 and predicting that joint efforts will produce further growth. “I would like to express my gratitude to Mr. Xi Jinping for supporting these measures,” Tokayev told the assembled journalists.

From Almaz Kumenov via Eurasianet.org

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