China to Lower Fuel-Oil Import Tax to 1% Next Year

By Winnie Zhu

Dec. 18 (Bloomberg) -- China, the world's second-biggest energy consumer after the U.S., will cut its fuel-oil import tax to 1 percent next year, potentially reducing costs for users based in the southern manufacturing hub of Guangdong.

The Ministry of Finance announced the tariff change in a statement on its Web site dated yesterday, without elaborating. A 3 percent tax is currently imposed on fuel-oil imports.

China halved the import tax in July last year to the present rate to lower costs for power generators and so-called ``teapot'' refineries facing shrinking profits. The country's small, privately run refineries, mostly in Guangdong province, use fuel oil as a raw material to make gasoline and diesel.

``We still cannot decide on the business strategy for next year, as the import-tariff cut only saves us about 50 yuan ($7.32) a metric ton while a potential increase in the consumption tax may boost purchase costs by about 800 yuan a ton,'' Bizer Tang, chief analyst at Guangzhou Twinace Petroleum & Chemical Corp, said by telephone from Guangzhou, capital of Guangdong.

China announced earlier this month a plan to raise gasoline and diesel consumption taxes by as much as ninefold from 2009 to conserve energy use. Taxes on other oil products will rise too, the government said on Dec. 5, without providing more details.

``We expect the consumption tax for fuel oil to rise to 0.8 yuan a liter from 0.1 yuan now,'' said Tang of Guangzhou Twinace Petroleum, the nation's largest private fuel-oil importer.

China's fuel-oil imports fell 15 percent to 22.5 million tons in 2007 on increased costs.

To contact the reporter on this story: Winnie Zhu in Shanghai at wzhu4@bloomberg.net;