Buyers will gain as food prices fall

Domestic consumers are expected to gain several benefits from the just-concluded free trade agreement between China and Australia, like enjoying lower duties on imported food and consumer products, industry experts said on Wednesday.

According to the FTA, tariffs on Australian wines, which had duty rates of between 14 percent and 30 percent, will be eliminated gradually in the next four years. Similarly the tariff for beef, which is between 12 and 25 percent, will be eliminated if the total amount is above 170,000 metric tons.

Dairy products including milk powder, which have a duty rate of between 10 and 20 percent, will also see gradual tax removals within nine to 11 years, with the special protection mechanism still in place for milk powder. Tariffs for nuts, fruits and fresh vegetables will also be eliminated. Duty for processed food such as honey, chocolate, cookies, cakes and other items will see steep reductions, said industry sources.

The impact of the FTA has already been felt in the nation's capital markets with a number of China-Australia FTA-related concept stocks surging. Xinjiang Tianshan Animal Husbandry Bio-engineering Co Ltd, which bought a pasture in Australia last year, saw its price increase by 8.75 percent to close at 28.7 yuan ($4.62) per share. COFCO Tunhe Co Ltd surged to the daily limit of 10 percent to close at 20.41 yuan per share. Its wholly-owned subsidiary in Hong Kong completed the purchase of Australian sugar company Tully Sugar Ltd in 2013.

"The agreement between the two nations covers a wide range of products and provides highly favorable policies which will make a huge difference to the related industries in China, especially in the agricultural and food markets," said Tang Jingdong, an analyst at Beijing-based Cinda Securities.

Despite a slight fall in demand, China was the third-largest importer of Australian beef in 2014, most of which was frozen beef shipments, according to the Rural Bank of Australia. Meanwhile, Australia also started live cattle exports to China last year, it said.

The amount of imported beef more than quadrupled between 2012 and 2013 as a result of better living standards of Chinese consumers and rising domestic demand, said Zhang Xiaoyu, a researcher with the Ministry of Commerce. More than half of the imported beef in China now comes from Australia, she said.

According to the latest statistics released by industry regulator Wine Australia, the total volume of wine exported from Australia increased 1.9 percent year-on-year to reach 700 million liters in 2014, with the total export value hitting a seven-year high of A$1.82 billion ($1.39). Over 90 percent of the high-end wines, which are priced at A$50 per bottle at the minimum, were sold to Asia. About 40 million liters of Australian wine was exported to China in 2014, up 8 percent year-on-year, with the total value amounting to A$224 million.