China Eases Tariffs to Boost Domestic Consumption

China may reduce import duty and consumption tax on some products to avoid tax losses through "unusual import methods," China National Radio reported.

The State Administration of Taxation plans to cancel the consumption tax for cosmetic products and abolish it for gold and jewelry in the longer term, according to the radio. The action aims to trim prices of imported products and encourage domestic consumption, an unidentified official said.

Purchasing through oversea agents amounted to 12 billion yuan, or 1.8 billion U.S. dollars, last year in China, according to a report on e-commerce. The report did not give a comparative figure from the previous year.

These agents offer lower prices because they usually evade duty and other administrative fees by bringing the items in personally.

The authorities are worried over the loss of several billion yuan in taxes annually.

Cosmetics are the most popular imported products and are subject to a tax of more than 50 percent when they enter the Chinese market.

Milk powder is another popular item after a massive melamine contamination scandal in 2008 damaged consumer confidence in domestic products. Japanese milk powder costs as little as 104 yuan in Hong Kong but 298 yuan in authorized shops on the mainland, a Web user said.

"An ordinary product for foreigners can be a luxury for domestic consumers because of heavy taxes," Zhao Ping, a researcher with the Ministry of Commerce, told the Economic Observer. "This is a misfortune for Chinese consumers."

Earlier this year, China halved import tariffs on electronics. Import tariffs on some electronic products, such as laptops and digital cameras, were cut by 50 percent, benefiting multinational companies, including Hewlett-Packard Co. (HP) and Dell Inc., and stimulating their sales in the world's fastest-growing IT market.

According to a statement posted on the Ministry of Finance's website, the import tariff on computers, digital video recorders and cameras fell from 20 percent to 10 percent starting Jan. 27.

According to Bloomberg, the lower tariff may "narrow the lead held by domestic leaders, such as Lenovo Group Ltd." because the U.S. computer manufacturers, including Hewlett-Packard and Dell, have struggled to boost their market share in China against Lenovo, the local industry leader.