China Slashes Import Tariffs on Consumer Goods In Boost For Trump And Western Exporters

China announced it is slashing import tariffs on 187 consumer products starting next month.

The Finance Ministry pointed to the cuts being concentrated in products in short supply domestically which, it believes, will prompt local producers to improve quality. The items in the list which, includes baby formula, diapers, electric toothbrushes, medicines, cosmetics, coffee machines and whisky, are part of the broader category of consumer goods which account for roughly 30% of total Chinese imports. Of all 187 tariff reductions, the biggest was on vermouth and similar alcohols, like Martini, which were cut from 65% to 14%. The strangest was the cutting tariffs on electronic toilet seats, where domestic production must be truly appalling from a quality perspective, or markedly insufficient.

Notwithstanding the Finance Ministry’s comments, it raises the question whether China is responding to loud and frequently repeated complaints from Donald Trump about the Middle Kingdom’s unfair trade practices. In 2016, the US trade deficit with China was $347 billion and is expected to rise to around $370 billion in the current year. In October 2017, the US accounted for 70% of China’s total trade surplus. More from Bloomberg:

China’s new plan to slash import taxes on a wide range of consumer goods promises to boost the prospects of multinationals in the Chinese market, with everything from Procter & Gamble Co.’s baby diapers to Diageo Plc’s whiskey becoming more affordable to local consumers. Tariffs for 187 product categories will drop from an average 17.3 percent to 7.7 percent after the cut on Dec. 1, the Ministry of Finance said in a statement Friday, citing the need to help consumers access quality and specialty products which aren’t widely produced locally.

The new policy follows President Xi Jinping’s call at the October Communist Party conclave to meet citizens’ demands for improved living standards and better quality products in the world’s largest consumer market. Foreign multinationals stand to benefit as middle-class consumers seek out goods stamped with foreign brands, while the cuts also encourage consumers to spend at home rather than on trips overseas.

This latest move might also reflect, in part, China’s need to rebalance the main driver of economic growth from investment to consumption. Bloomberg noted the consumer angle:

“It’s aimed at three things: helping boost consumption in China, reforming the Chinese economy by continuing to open it up, and sending a signal to the world and particularly to the U.S. that it is committed to advancing global trade,” said Shane Oliver, head of investment strategy at AMP Capital Investors Ltd. in Sydney.

Robust consumption is an increasingly important stabilizer for the world’s second largest economy, as it shifts away from an investment- and export-led growth model. Domestic consumption contributed 64.5 percent of GDP in the first three quarters of 2017, according to the National Bureau of Statistics.

China is trying to encourage more foreign companies to sell locally and wants to give consumers more choice,” said Matthew Crabbe, Mintel International Group Ltd.’s director of Asia-Pacific research. “What it will do is help foreign products already within the market get more competitive.”

The South China Morning Post (SCMP) notes the growing preference among some Chinese consumers for foreign goods which they perceive to be of higher quality. This is likely to be an issue for the Chinese authorities.

The death of young children in a contaminated milk scandal in 2008 in China led to a huge increase in mainland Chinese buying baby milk powder overseas and particularly in Hong Kong. Meanwhile, 42 million Chinese bought foreign products online last year, spending about 1.2 trillion yuan (US$182 billion) , according to the Hangzhou-based China Electronic Commerce Research Centre. The number of shoppers is expected to reach 59 million this year and the value of purchases to rise to 1.85 trillion yuan, the industry consultancy said.

With tariffs on some types of baby formula cut to zero, there were sharp losses in Chinese dairy stocks. Inner Mongolia Yili retreated as much as 5.85 before closing 2.0% lower, China Modern Dairy Holdings also closed 2.0% down after losing as much as 2.6%. Chinese food stocks, such as Henan Shuanghui Investment & Development and Muyuan Foodstuff were sharply lower on the news but recovered later in the day, helped by the broader Chinese equity market.

Europe, a big exporter to China, saw its main consumer stocks respond favourably to the announcement on the open of trading.  The Stoxx 600 Food and Beverage index rose by 0.7% and was the biggest gainer in sector terms - with Danone +1.4%, Pernod Ricard +1%, Diageo +0.9% and Nestle +0.6%. While taxes for some medicines, such as antibiotic and insulin products, were reduced from 6%to 2%, major European pharmaceuticals stocks, like Novartis and Glaxo SmithKline ere marked lower in the morning session. As Bloomberg notes, some of the biggest overseas beneficiaries are expected to be P&G, Danone and Nestle.

Among the foreign companies poised to benefit is Procter & Gamble, which gets 8 percent of its sales from Greater China. P&G, the owner of brands such as Crest, Gillette and Tide, may get a lift from cuts to items including diapers, personal care products and dental products. For instance, the tariff on electric toothbrushes will fall from 30 percent to 10 percent.

The government’s plan to eliminate tariffs on some types of milk powder will help companies like Danone and Nestle SA that compete with local brands in the large market for infant formula. The country’s infant formula market will increase about 15 percent to 123 billion yuan ($18.7 billion) by 2020, according to a Goldman Sachs Group Inc. report in October. Chinese parents worried about a series of food-safety scandals often favor foreign brands.

While a welcome move, some commentators think that the impact on China’s trade balance will be fairly muted. Speaking to Bloomberg, Christopher Balding of the Peking University in Shenzhen said “it is unlikely to move the needle much on the trade balance but it is still a small, solid step forward. China is moving to a consumption economy and with so much cross-border commerce streaming in across these product segments, they are under pressure to lower tariffs.

The SCMP quoted Zhao Yang, chief China economist at the Japanese financial services group Nomura, who said the latest tariff cuts were largely symbolic and its boost to imports would be fairly limited. “Despite import tariffs being greatly slashed over the past several years, 17 per cent value added tax remains intact,” he said. Beijing, however, is keen to increase imports as it wants to reduce trade friction with other countries, said Zhao. China is due to hold its first import fair in Shanghai in November 2018.


Arnold Cry Baby Moe Fri, 11/24/2017 - 08:10 Permalink

Forward look:…

"Australia currently exports minimal quantities of pork to the world’s biggest consumer of the meat because of the lack of certification for local products and tariffs of as much as 20 percent that will be removed by 2018 due to a free-trade agreement announced between Canberra and Beijing this week."…

I don't think that Mohammed made it that far east, yet.

In reply to by Cry Baby Moe

CheapBastard Arnold Fri, 11/24/2017 - 09:40 Permalink

Trump is slowly Winning for America.Even the Chinese knew Soweeto bin Bama is a complete fool as was Kerry. The Chinese disliked Obama so much and felt he is inferior as shown by them not even moving the staricase to his plane when he landed.There were no parades for him and no flocks of pretty little Chinese girls waving flags like they did for Trump, whom they repsect greatly as a strong successful businessman.

In reply to by Arnold

FluffyDog6 Fri, 11/24/2017 - 05:44 Permalink

They still have a tariff of 10% on the items listed, and 25-50% on most other items.  Trump is right on this -- why do we let them into our markets, yet they impede our exports at every turn?  (The Japansese pulled this bullshit in the 1980s too.)

roddy6667 quadraspleen Fri, 11/24/2017 - 05:53 Permalink

It has built in heat, a bidet, and also a blow dryer. There is no shortage of these things in China. I was in a home design store and they had a couple dozen different ones. Most are from Japan and Korea, but major Chinese appliance makers have their brands, too. What is going on here is Xi is pretending something to help Trump when it won't do a damn thing. America got straight-armed again.

In reply to by quadraspleen

perkunas Fri, 11/24/2017 - 06:09 Permalink

IF trump was a real man, he would throw them out of the WTO. Tariffs, are only part of the problem, how do you compete with slave labor and no environmental standards?. The system is a deck of cards, designed to keep you poor, because, the 1 percent own those factories in China. It's better, having no middle class, to compete with their monopoly system.

Endgame Napoleon haruspicio Fri, 11/24/2017 - 11:23 Permalink

Invite the leaders of all the other bigwig countries to a fancy convention hotel, where they all meet for a week over expensive receptions and dinners, wearing their $2,000 suits, sipping their $70-per-cup drinks and eating their gourmet finger foods while chatting, pleasantly, about the rigged global trade system and listening to loud protests from throngs of anti-globalization groups.

That is the WTO.

In reply to by haruspicio

roddy6667 perkunas Fri, 11/24/2017 - 07:39 Permalink

China? No middle class??? Wow! You are the retard of the day! 54 % of Chinese are middle class now, based on Western standards. The middle class is growing, not shrinking as in America. It only takes $9600 US a YEAR to maintain a middle class lifestyle in China.Where do you get these foolish notions you base your opinions on?

In reply to by perkunas

pparalegal Fri, 11/24/2017 - 06:24 Permalink

As the economy grows beyond 3% for the first time in 8 or 10 years, the progressive media is concentrating on.... suddenly finding the Hatch act and prosecuting Kellyanne Conway's Fox & Friends statements about Alabama.Conway’s endorsement looks like it violated the Hatch Act, a regulations that limits federal employees’ involvement in partisan politics. The rule specifies that an official may not “use his official authority or influence for the purpose of interfering with or affecting the result of an election.”

Endgame Napoleon pparalegal Fri, 11/24/2017 - 11:50 Permalink

You could cheerlead, which [hurts] all of the underemployed citizens who must live on earned-ONLY income and who are not helped by any of the stimulus policies, like more child-tax-credit welfare to reward part-time worker moms with spousal income who lower wages for those with no unearned income for womb productivity.

Underemployed Americans who must live on low, earned-only income are bashed for their underemployment, while single moms working 20 hours per week to stay below the less-than-$1,000 per month income limit for welfare are above critique due to womb productivity—I mean due to being “working families.”

A better argument is that, as the economy continues to churn out mostly part-time / temp / low-wage gigs for people who have unearned income from spouses or from government that covers their major household bills, like free rent, free EBT groceries, monthly cash assistance and child tax credits that max out at $6,318, the MSM is not focused on the mass [UNDER]employment of citizens and the meek and barely perceptible wage growth that does not help those with rent that consumes half or more of their earned-only income. Nor is the media focused on the un-budged and record-low workforce participation.

They are no more focused on serious issues than they were during the above-criticism Obama Administration.

With the difference being that, during the Obama Administration, it was fine for the governor of Virginia and others to [interfere] in elections on behalf of their buddies or a buddy’s wife. It was fine for the Clintons to campaign in Kentucky for their daughter’s friend, even booting out an actress, Ashley Judd, who wanted to run against Ms, War on Women who lost the general election, btw. Was Hillary still the Secretary of State at that point?

The rules apply to some, not so much to others, just like in the many, many workplaces full of dramatically absentee working-mommy cronies, back watching but not meeting their quotas, and bullying out the [women] who are not in their working-mom protection rackets, getting away with all of that harassment of [women] while the media cries sexual harassment day and night.

In reply to by pparalegal

overmedicatedu… Fri, 11/24/2017 - 06:45 Permalink

wait wait china has tariffs..the free traders (nwo paid soros fools) who used to post here..would be amazed,,they all posted like there were no tariffs and us rednecks didn;t know nuffin.

falak pema overmedicatedu… Fri, 11/24/2017 - 07:12 Permalink

Your medicine based on placebos keeps you in a delusional perma-state where you have not been watching the ball of the WTO arrangement :"Our Oligarchs use your cheap labour to make big bucks so that we can consume and create our Pax Americana OLIGARCHY... And We don't give a FLYING FUCK about your own FU MAN CHU type peasant economy. They are YOUR SLAVES working for the US market PERIOD"...That was the WTO deal.That has been the US strategy of the most favoured nation that has been prevalent since Reagan and Deng Xiaoping shook hands at the beginning of the opening of the Chinese market (early 1908s), to outsource Nike textile products and start the Walmart connect; before NWO and its dissemination under the Clintonista and Internet age launch of Apple and Microsoft type Silicon valley TECH markets  took that outsourcing models in CHINDIA to the levels we know today...Stop playing at Rip Van Winkle, its your own Oligarchs who are now waking up to the fact the Chinese have a huge internal market thanks to its export behemoth-- that was protected by their ruling Commie- Oligarchy class-- as the US Oligarchs didn't care two hoots about what a Chinaman earning 10$/day consumed at home!Rip Van  Winkle slept for 20 years remember !Now its a wake up call.

In reply to by overmedicatedu…