China Slashes Tariffs

Doing business in the world's No. 2 economy isn't easy, but things just got a bit better. Next month, China will slash import tariffs on consumer goods including skin care products, Western-style clothes and diapers. The move is expected to boost global brands, even as it bolsters domestic consumption amid faltering economic growth. The Ministry of Finance said in a statement, it would lower import taxes for some products starting June 1 by an average of over 50% as an “important measure to create stable growth and push forward structural reform.”


Specifically, tariffs on skin care products will fall to 2% from 5%, according to sources.

The decision follows a statement by China's State Council, the country's Cabinet, in April that it would look to reduce import tariffs on some consumers goods to stoke domestic spending and support the slowing economy at a time when record numbers of cash-rich Chinese tourists are splurging overseas.

The move comes as annual economic growth in the world's second biggest economy slowed to a six-year low of 7% in the first quarter, partly driven by a downturn in investment and manufacturing, which has prompted a range of stimulus measures from Beijing. China retail sales rose 10% last month, but eased from March as data showed that China's economy is under persistent pressure from soft demand at home and abroad.

Import tariffs for Western-style clothing will be reduced to between 7-10% from 14-23%, and taxes on ankle-high boots and sports shoes cut in half to 12%, the Ministry said. Tariffs on skin care products will drop to 2% from 7.5%.

Companies that stand to benefit from lower import duties include diaper makers Procter & Gamble and Japan's Unicharm, US sports shoe firms Nike and Adidas and cosmetics companies L'Oreal and Amorepacific.

Chinese consumers often grumble about paying higher prices for goods than in other markets, partly due to steep import taxes. Analysts say consumers in China pay around 20% more for luxury goods than their counterparts in Europe. The Ministry said lowering duties should steer a shift in consumers' shopping habits, helping boost imports and domestic consumption.