SHANGHAI –China’s government is preparing to lower tariffs on some imported consumer goods in bid to incentivize consumers to shop at home rather than abroad.
It’s not yet clear which consumer goods would be impacted, and how much tariffs would be reduced, but the State Council said that tariffs on “some imported consumer goods will be cut in parts of China” by the end of June.
“Cuts on tariffs on imported goods will benefit domestic consumers and also accelerate industrial competition,” Premier Li Keqiang said in the government statement released Tuesday evening.
Between customs, duties and VAT payable on certain consumer and luxury items, imported products in China are usually at least 20 percent, and in some sectors as much a 70 percent, more expensive in Mainland China, compared to the neighboring duty free port of Hong Kong.
To give domestic travelers more access to tax free shopping within China, the state council simultaneously announced an increase in duty free stores to be opened at Chinese borders, with a higher purchasing cap for individual tourists and more categories of products.
The move to further expand China’s domestic duty free industry comes after the successful opening of the world’s largest duty free store on Hainan Island last year. The 485 thousand-square-foot store was part of a government experiment to make the island holiday mecca a tax-free shopping mecca, an experiment that has had other border regions clamoring for a similar arrangement in recent months.
The announcement comes as annual economic growth in China slipped to a six-year low of 7 percent in the first quarter, though analysts were circumspect in their evaluation of the potential for tariff cuts and more tax free shopping to make a big difference in domestic consumption.
Benjamin Cavender, a senior analyst at China Market Research Group, said the lower tariffs would naturally make it easier for Chinese consumers to buy imported products here on the Mainland. But he also stressed that there are myriad reasons why Chinese shoppers buy offshore – not all of which are related to price.
“As companies make it easier to buy directly from international websites or stores, customers are starting to make that choice because they trust that channel more. If it’s coming from US or Europe it’s more likely to be real than something bought from here,” he explained.
“For bigger ticket purchases there’s still going to be an impetus to purchase overseas, with the corruption crackdown it’s less obvious, but it’s also about the experience of going overseas and shopping overseas, it’s not just about price.”
According to Angelito Tan, co-founder of RTG Consulting, the move will be positive for consumers and brands, and another blow to grey market operators, who have also been hit in recent times by moves from luxury brands to normalize pricing worldwide.
“Overall, this tariff cut will be good for Chinese consumers, as it will bring consumer goods prices, especially luxury goods, closer to global pricing. For brands, this means more accessibility to a wider consumer group, and ultimately, a greater incentive to invest more into the China as their sales outlook brightens,” he said.
“In addition to the obvious negative implications to the grey and parallel sales operators, the tariff will eventually affect those countries that heavily rely on Mainland Chinese tourists. I believe that smart tourism officials have already made steps to stem this reliance, by widening their tourist target profile, way before this tariff was made announced. “
China is stepping up customs monitoring procedures in order to better regulate online shopping and the dai gou industry – in which agents bring cheaper goods from overseas into China and often avoid paying customs and duties. Local media reported that the State Council addressed these matters on April 9.
According to local media, China has asked customs officers to crack down on imports of counterfeit goods and products that violate intellectual property rights sold through online outlets. The government has reportedly asked officers to be more vigilant in terms of checking to see that taxes and import tariffs had been paid on packages.