'Side effects' of China's new edible oil controls

KUALA LUMPUR: China's new quality control rules on imported edible oils may spur food price inflation and possibly wastage if not properly implemented.

China is Malaysia's biggest export market, while Malaysia is China's largest trading partner in Asean. 

One of Malaysia's significant exports to China is palm cooking oil for daily use. Every year, China spends some US$4 billion to buy close to four million tonnes of the kitchen staple from Malaysia.

It was reported that from January 2013, China's Inspection and Quarantine Bureau will start to enforce a new set of technical specifications requiring the quality of imported edible oil to be at a cost-adding level.

The current understanding is that as long as palm oil exporters meet Poram's specifications, shipments from Malaysia are likely to qualify quarantine rules imposed on vegetable oil imports into China.

In a recent interview with Business Times, however, Palm Oil Refiners Association of Malaysia (Poram) chief executive officer Mohammad Jaaffar Ahmad begged to differ. 

He noted that there could be a misunderstanding and that there are actually many uncertainties at play. 

In explaining the implication of China's new rules on imported edible oils, Jaaffar likened the process to a consumer buying fruits from the supermarket and bringing it home.

"If you buy apples from the supermarket, you accept the quality as it is, at the time of purchase. You do not hold the supermarket responsible, if, on the way back home, the apples got bruised or deteriorate in quality from the high heat of your car parked under the sun," he said.

The new rules in China, to be effective from January 2013, seemed to hold palm oil exporters responsible for the quality of oil deterioration although the price paid is not that of door-to-door delivery.

"If the China quarantine authorities want guaranteed landing quality, new cost-adding arrangements would have to be factored in. This can be very expensive and will result in unnecessary food price inflation in China," he said. 

Last month, China's inflation rate fell to a three-year low, having expanded only 1.7 per cent from a year ago.

"We need to be more discerning of the implication of the new rules. We are well aware authorities from both China and Malaysia need to ensure imported cooking oil remains affordable and safe to consume by China's 1.3 billion population and at the same time, reap steady income for palm oil exporters here," Jaaffar said.

Back in April 2011, during his second official visit to Malaysia, Premier Wen Jiabao promised Prime Minister Datuk Seri Najib Razak of closer diplomatic and trading ties. 

Even though China has long been running a trade deficit with Malaysia, Wen reportedly said China have no complaints. In fact, China agreed to continue buying Malaysia's palm oil. 

"Malaysia and China are facing economic development challenges. Therefore, with deep co-operation, we can together deal with such challenges and fulfil our mutual interests," Wen reportedly said.

In forging warmer trading ties, Jaaffar expressed hope that both countries will come up with mutually beneficial arrangements.

"It is in the interest of China's consumers that they should be able to go on buying affordable and nutritious cooking oil. It is also in the interest of palm oil exporters that shipment into China should not be rejected by reasons they have no control over," he added.

Plantation Industries and Commodities Minister Tan Sri Bernard Dompok is scheduled to visit China for the Malaysia-China Palm Oil Trade Fair & Seminar 2012 in Chongqing from November 29 to 30 2012.