On 22 November 2017, the Ministry of Finance of the People’s Republic of China issued a new regulation, which will lower import duties for 187 products. For diapers, duties are abolished altogether. According to an article published in the People’s Daily, certain milk powder products will also be exempted. The regulation (“Notice by the State Council Tariff Commission Committee on the adjustment of import tariffs of some consumer goods” – Shuiweihui (2017) No. 25) will enter into force on 1 December 2017.
The 187 products (the full list in Chinese can be downloaded here) comprise popular consumer goods, such as food products, health care utensils, cosmetics, medicine, clothes, and other daily necessities.
On average, the import duties will be more than halved and drop from 17.3% to 7.7%. In some cases, the reduction will be even larger. For example, the tariffs on the import of coffee machines are reduced by two thirds from 32% to 10%.
Why are tariffs reduced?
According to the official Xinhua News Agency, the reduced tariffs will give Chinese costumers greater access to high-quality goods and increase competition for domestic producers, which, as a result, are forced to raise the quality of their own products. This, of course, fits neatly into the official strategy for supply-side reform, which was announced in late 2015.
However, the article also indicates that there might be yet another reason: the growing number of Chinese traveling abroad for shopping. In 2016 alone, Chinese tourists spent over 260 billion USD for goods purchased outside of China. One of the main reasons is the high price of most foreign consumer goods in China compared to their home markets. A tariff reduction could, therefore, aim at reducing this gap and at convincing more Chinese to spend their money at home. But ministerial officials also point out, that tariffs only account for 0.5% to 7% of the retail price.
Nonetheless, the reduction might still make some products more attractive and offer better opportunities to foreign companies. This might be especially true for cross-border e-commerce, where reduced import taxes for single shipments are already in place (for the exact rates, read our article on cross-border e-commerce taxation). Foreign vendors which sell their goods to Chinese customers via Chinese e-commerce platforms like TMall or Jingdong could thus see their sales numbers go up.
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Richard Hoffmann is a partner at ECOVIS Beijing China. Richard obtained an honors degree in law and worked in Germany, the United States, and China for various prestigious law firms prior to joining ECOVIS. In addition to being a member of the board of ECOVIS International, he is Supervisor for the China business of a respected German company and shares his extensive knowledge to students by teaching commercial law in China at SRH Hochschule Heidelberg. He has published more than fifty articles in international magazines, frequently speaks at high profile events in China and abroad and is often invited as a legal expert by international TV stations. Contact: firstname.lastname@example.org
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