AUSTRALIAN dairy farmers will benefit from China's decision to drastically reduce the tariffs on infant milk formula.
The Chinese government has announced more than 540 tariffs will be reduced next year, as the country moves to liberalise its trade ties with the rest of the world, The Australian reports.
The tariffs on infant milk powder will be cut from 20 per cent to 5 per cent, a move that will benefit Australia and New Zealand's dairy farming industries.
Australia is the third-largest provider of infant milk powder with about 15 per cent market share in China, behind New Zealand's 18 per cent and Singapore's 37 per cent.
But in total milk powder exports, Australia is the second-largest behind New Zealand.
The sales of infant milk powder to China were worth $16.56 million in the past financial year, up from $14.27m a year earlier.
A peak in sales, worth $48.5m, occurred three years ago when China suffered the melamine milk scandal that infected 300,000 babies and killed six.
The decision to cut the tariffs has been interpreted as a signal that China wants to increase imports and lock in supplies from its key markets.
The Chinese Academy of International Trade and Economic Co-operation's director of research, Li Jian, said the tariff reduction would benefit Australia and New Zealand given the two nation's combined market share.
"The cut in tariffs is certainly good news to Australia and New Zealand milk powder products and it will be a stimulus to Chinese domestic demand for imported milk powder," he said.
Mr Li said the move was also an indication that China wanted to proceed with a free-trade agreement. Negotiations over an FTA between Australia and China have been going on since 2005 without a deal being finalised. "It is also a good sign for the free-trade negotiation between China and Australia," Mr Li said.
China also hopes the reduction will reduce the price of imported milk products