China cuts tariffs on consumer goods, allows FDI majority stakes

CHINA has announced tariff cuts on consumer goods including avocados, mineral water and baby carriages in a bid to spur growth driven by domestic spending and reduce export reliance, reports The Associated Press. The latest changes are meant to "enrich domestic consumption choices," said a Finance Ministry statement. They take effect December 1 2017 and will reduce import duties on some products by up to two-thirds. Beijing faces pressure from the United States, Europe and other trading partners for better access to its growing market. Bejing also announced it would lift its limit on foreign ownership of securities, fund management and futures companies from a minority stake of 49 per cent to a majority stake of 51 per cent. But the range of 187 products affected by the latest cuts was relatively small and it was unclear how China's trade balance might be affected.

Foreign products often are seen as higher quality, safer or cheaper, which has fuelled a spending boom by Chinese tourists on basic goods including shoes, cosmetics and infant formula. Beijing announced a similar tariff cut in 2015 for imported clothes, shoes and other items. Encouraging consumers to buy foreign goods from Chinese retailers instead of while travelling abroad also can help generate jobs, said Industrial Bank economist Lu Zhengwei. "We know that consumer products are not products of high value and we can't depend on them to achieve a fundamental turnaround for China's trade imbalance," said Mr Lu in Shanghai. "But step by step, it may work if we keep doing things that are mutually beneficial to both sides and good to the markets." China reported a US$510 billion global trade surplus last year, though total trade contracted in a sign of weak foreign and domestic demand. It said a similar change would be made for life insurance companies and those restrictions would end in five years.