Cut tariffs on imported cars cautiously

CHINA LOWERED its tariffs on 187 kinds of imported commodities last year from 17.3 percent to 7.7 percent on average, said Liu He, vice-chairman of the National Development and Reform Commission, at the World Economic Forum last week. Beijing Youth Daily comments:

It is noteworthy that Liu, who headed the Chinese delegation in Davos, also said that China will continue to lower its tariffs in the future, including those on imported automobiles.

Many potential buyers expect the tariff cuts will help bring down the retail prices of expensive imported cars. In fact, they should tone down their expectations as there are many links between the manufacturing of the cars overseas to the vehicles being offered by Chinese retailers.

Generally speaking, the retail price of expensive imported cars is almost twice that of its price before customs clearance. That is to say, it is impossible to expect the retail price of a car to drop by as much as that of the tariff rate cut, which insiders predict will decrease from 25 percent to 15 percent at least.

However, the number of cars China imports each year has soared from 70,000 in 2001 to more than 1.07 million in 2016, so even though they still only account for about 4 percent of the Chinese market, it is almost certain that lowering the tariffs on them by a large margin will increase their share dramatically.

By lowering its tariffs on imported cars, China will be fulfilling its commitments as a member of the World Trade Organization. Doing so step by step will help protect the healthy development of Chinese automobile enterprises.