Monthly Market Intel – March 2018: New round of import duty reductions announced by China

May 10 2018

China has announced the fourth round of import duty reductions, which came into effect on December 1st, 2017. The reduction covered 187 categories, including food, health & nutrition, skincare & cosmetics, clothing, home appliances, entertainment and groceries.
On average these changes reduced import duties by 10%.
For example, import tax for infant formula has been reduced from 20% to 0%, and baby nappies have been slashed from 7.5% down to 0% as well.
What are the implications for your business?
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Chinese travellers will have less incentives to buy goods when travelling overseas as the price gap between imported goods in China vs the same goods in overseas become narrower.
However, import duties will produce limited impact on the actual retail prices of imported goods in the country for the following reasons:
• Import duties only account for 0.5%-7% of imported goods’ retail prices
• Apart from import duty, the retail price of imported goods also include 17% value added tax and consumption tax (depending on the categories). Both VAT and consumption tax apply to all goods regardless of their origin of production
• We are unlikely to see any reduction to the VAT and consumption tax in the near future;

Nevertheless, the import duty reduction will spur further growth of imported goods from those countries that have not signed free trade agreements with China and Australian exporters to China will face intense competition from other countries.
For more information on how these legislative changes will impact your business, please contact us today .