China is to cut import tariffs on rubber in 2010, helping domestic tyre makers who have enjoyed increasing demand from soaring Chinese car production but got embroiled in a US trade dispute this year.

The import tax on natural rubber will fall 23% to CNY2,000 per tonne while the tax on higher-value rubber smoked sheet will fall 38% to CNY1,600 per tonne, the Ministry of Finance said. Both were previously taxed at CNY2,600 yuan, or a much less commonly used flat 20%, which remains unchanged, Reuters noted.

The tax cut will help reduce costs for Chinese buyers and traders said it could spur imports by China, the world's largest consumer of rubber.

"We might import more in the coming months, but we will first calculate our cost, considering the demand and natural rubber prices in the global market," Sheng Liang, a trader with Qingdao International Rubber Exchange Market, told the news agency.

"But we still see stable market demand and, as the import tax for rubber smoked sheet was revised down so much, we might consider buying more smoked sheet," Sheng added.

Traders in Thailand said the move should support physical rubber prices and prevent them from falling significantly over the year end period when supply is expected to rise due to favourable weather in what is the world's biggest rubber producer.

"That would help support physical prices and futures prices as well," a trader at Thailand Hat Yai rubber centre, told the news agency.

A Singapore-based trader said the tax cut would help support tyremakers to produce and export more, and is expected to keep demand for natural rubber buoyant next year.

"I think the Chinese government wants to support the tyre industry. They are sending a message to the market that they will import more rubber next year," he said.

One southeast Asian dealer told Reuters the tariff change meant natural rubber imports would enjoy relatively lower costs than synthetic rubber which could help synthetic rubber regain some market share from natural rubber in China.

Imports of synthetic rubber, which is cheaper than natural rubber, jumped 17% in the first 11 months of this year compared to the same months of 2008, while shipments of natural rubber slowed 2.8%, according to China's customs office.

China imported 1.53m tonnes of natural rubber and 1.34m tonnes of synthetic rubber between January and November.

The same dealer said China's own rubber producers would see the policy change as a weakening of the protection of their industry. But two Chinese rubber traders said they had hoped for a bigger cut in the tariff.

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