China cuts tariffs to spur growth, plug key shortages

A port in Shanghai, China. The reductions come as tensions between the US and China have cooled over trade.
A port in Shanghai, China. The reductions come as tensions between the US and China have cooled over trade.PHOTO: REUTERS

Move signals Beijing's commitment to open trade, could boost flagging growth: Experts

Beijing will lower tariffs on over 850 goods and products coming into the country from Jan 1, including frozen pork, medicine and some high-tech components.

Analysts say this signals a commitment to more open trade and could also boost China's flagging growth.

China's Finance Ministry said yesterday that the latest move was meant to expand China's imports and "increase imports of products facing a relative domestic shortage, or foreign speciality goods for everyday consumption".

Beijing will temporarily reduce tariff rates for goods below "most-favoured nation (MFN)" tariff levels, which China has agreed to extend to fellow members of the World Trade Organisation.

The reductions come as tensions between the United States and China have cooled over trade.

Both sides recently announced they have reached a "phase one" trade agreement that will see Beijing ramp up purchases of American agricultural products and other goods in return for a rollback of some US tariffs.

The fresh tariff cuts will see reduced tax rates for a wide range of products such as frozen pork, avocados, asthma medication and electronic components.

Frozen pork, for instance, will see its tariff rate cut to 8 per cent from the MFN duty of 12 per cent. China is trying to boost pork imports to plug shortages as its hog herds have been decimated by an African swine flu epidemic, and demand is expected to spike ahead of Chinese New Year.

In addition, goods from countries such as Singapore, New Zealand, Australia and South Korea will be subject to lower duties than agreed under the trade agreements they have with China.

Singapore, which has a free trade agreement with China that covers 95 per cent of the Republic's exports, will see tariff rates on goods such as petroleum products, electronic components and some food products reduced further.

  • >850

    Number of goods and products entering China that Beijing will lower tariffs on, from Jan 1 next year. These include frozen pork, medicine and some high-tech components.

Singapore's Ministry of Trade and Industry said the "lower import tariffs will benefit Singapore exporters by increasing cost competitiveness of Singapore's exports to China for the goods covered".

Experts said China was reaffirming its commitment to free trade amid global trade tensions.

Ms Agathe Demarais, the Economist Intelligence Unit's global forecasting director, said Beijing was also hoping to "boost slowing economic growth through a reduction in business and consumer costs".

"China also reaffirms its free-trade stance, in sharp contrast with US protectionist rhetoric," she said.

 
 
 
 

Chinese experts said this is another concrete step that China is taking to open up its markets.

Professor Zhu Feng, director of Nanjing University's Institute of International Studies, pointed out that China's new foreign investment law, which seeks to better protect the rights of foreign businesses, will also come into effect on Jan 1 next year.

This year, China also relaxed restrictions for investments in its financial sector.

"I personally feel the trade war has brought positive impact to China. It realises that opening its market, and reducing tariffs and investment limits and lowering trade barriers, these are all things that China needs to do," he said.

Dr Wang Huiyao, president of the Beijing-based Centre for China and Globalisation think-tank, said the move will also spur competition in China's domestic market.

"There will be more foreign products coming into China and this will stimulate domestic competition for better-quality products - this is the right direction (in which) we need to go," he added.

 
A version of this article appeared in the print edition of The Straits Times on December 24, 2019, with the headline 'China cuts tariffs to spur growth, plug key shortages'. Print Edition | Subscribe