The measures include: directly selling large quantities of the country's natural rubber reserve to tyre producers, seeking possible increase of the import quota of natural rubber and avoiding the possibility of an increased import quota entering the futures market for speculation.

The move was announced by an official from the State Development Planning Commission (SDPC) at the Conference on Analysis of Economic Performance of the Chinese Rubber Industry on Saturday, held in Beijing.

Representatives of major tyre producers and traders, officials from the China Rubber Industry Association and officials from the SDPC and the State Economic and Trade Commission attended the conference.

The official, who declined to be named, said the allotted 850,000 ton quota of natural rubber imports implemented this year only makes up part of the total earmarked for 2003, with the remaining part of the quota to be distributed soon to various enterprises.

In the event that the total quota fails to quench domestic demand, concerned government departments will be able to apply to the State Council for an additional share.

The official stressed that the better part of the remaining slice of the import quota will be distributed directly to tyre producers, in an effort to avoid the quota entering the futures market for speculation.

Tyre firms have voiced concerns that traders at the Shanghai rubber futures market over-speculated the raw material, inflating the already soaring price of natural rubber.

Since the end of last year, the price of imported natural rubber has skyrocketed, reaching a record high of 14,000 yuan (US$1,690) per ton in February, a 50 per cent jump from the same time last year, according to the association.

The rise of the rubber import price has also pulled up the price of domestically produced rubber. Consequently, the soaring prices of both natural rubber and synthetic rubber have forced a sharp increase in production costs at tyre enterprises in the country with some firms halting or reducing production to avoid losses.

"Between January and November last year, the 48 members of the China Rubber Industry Association recorded an average monthly profit of 100 million yuan (US$12 million). But in December, their monthly profit dropped to 30 million yuan (US$3.62 million) and in the first month this year, they suffered a loss of 50.56 million yuan (US$6.22 million)," a statement from the association said.

On average, a large tyre manufacturing enterprise each year consumes 30,000 to 60,000 tons of rubber. Based on this figure, the sharp increase in the price of rubber will cost a firm 150 million yuan to 300 million yuan (US$18.13 million to US$36.27 million) more per year, the statement said.

China is now the world's second largest producer of tyres with an annual output of 130 million units of tyres. The country's rubber industry each year consumes about 2.8 million tons of rubber, half of which is natural rubber. But the domestic natural rubber production can only meet about 40 per cent of the demand.

(China Daily March 11, 2003)