China Import Tariff Cut: Average rate lowered to 7.7% on 187 consumer products

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It's been almost two months since China lowered import tariffs on nearly 200 consumer products, as part of the continuing opening up of its economy. With the country entering more free trade deals, experts say the new measures will diversify domestic demand but could also put pressure on domestic products. Ren Xueqian has more.

According to data published by the research company Kantar Worldpanel, 93 percent of Chinese families have purchased imported products at one point or another.

REN ZILIN CONSUMER "All my cosmetic products and my son's diapers and formula are imported."

HOU SHUYU CONSUMER "I buy imported health supplements because I workout a lot."

Recent reductions in import taxes lower the average rate to 7.7 percent on 187 consumer items, including wine, food, pharmaceuticals, cosmetics and clothing.

Tariffs on popular items such as infant formula have declined from 20 percent to 0; for baby diapers they've dropped from 7.5 percent to zero. But some consumers say they have yet to feel the change.

MAGGIE ZHOU CONSUMER "I buy baby products and wine, I haven't seen much change in the prices. It'd be much easier to get the products in China."

In addition to import tax, foreign products coming into China are subjected to value added tax and consumption tax. With a cut to import taxes, the cost of goods coming into China will decrease. But once the product is in circulation, the market determines its final price.

PROFESSOR ZHU QING SCHOOL OF FINANCE, RENMIN UNIVERSITY "The reductions are still relatively recent. But with more products coming into China with lower custom duties and value added tax, prices will eventually level off as there will be more choices for consumers and there will be strong competition among importers."

Trade experts say lower prices of foreign goods could improve the quality of imports, encouraging more consumption.

ZHAO KESAI WINE CONSULTANT "The quantity of imported foreign wine has increased. With consumption climbing and more people are willing to try high-end products, businesses are more willing to import more brands, I think this will further diversify our market."

But such increased market access isn't good for everyone.

LISA LI INDEPENDENT COSMETIC DISTRIBUTOR "Most of my clients prefer foreign brands. In the long run if prices are the same between foreign and domestic products, it will be harder for me to get new clients, because they can just get the product themselves."

Experts say more access to foreign products will put more pressure on domestic brands to stay competitive.

PROFESSOR ZHU QING SCHOOL OF FINANCE, RENMIN UNIVERSITY "Domestic consumers, may on the other hand, be producers who make the very product they later consume. Hence the custom duties can protect their jobs and safeguard small businesses from foreign competition."

With China opening more of its market to the outside world, Professor Zhu says in the long run the inflow of foreign products can encourage domestic brands to improve product quality, increasing their competitiveness in the domestic and international markets.