As part of a strategy to stimulate consumer spending China have announced that from 1st December 2017 they will cut import tariffs on 187 consumer categories including food, drugs and apparel. A move that may boost the prospects of brands seeking to penetrate the Chinese market.
The historically high taxes on foreign brand imports has led to Chinese shoppers spending increasing amounts outside the country and encouraged a grey economy, a development which this move is designed to arrest, as part of a longer-term move towards a consumption driven economy.
Chinese consumers numbering 42 million bought US$280.78 billion of foreign products via cross-border e-commerce platforms last year. The number shopping this year are expected to reach 59 million.
From the1st December tariffs on the listed consumer products – which include food, pharmaceuticals and fashion – will fall an average of 7.7% from the current 17.3%, the Ministry of Finance have confirmed.
The fall in import tariffs will open the domestic market to international brands which will be able to reduce their retail price in China, increasing opportunities for luxury and fashion brands to grow market share as local consumption rises ahead of purchases abroad.
The move comes amid complaints from trading partners, particularly the United States, highlighting China’s trade surplus and what many see as unfair trade barriers to restrict the sale of foreign goods in China.
The products being cut are largely in short supply within China and will provide more choice for domestic consumers, but many believe the immediate impact of the cuts is likely to be limited.
Beijing waived the 30% tariff for non-luxury cosmetics and cut the tax rate for luxury products to 15% last year but, because of the continuing demand from Chinese buyers no significant price drops were passed on.
Analysts suggest that tariff cuts like these are largely symbolic and will have a fairly limited impact on imports, largely because the 17% value-added tax remains in place.