Tariff cut on IT products to push China's industrial innovation

BEIJING - China's decision to cut tariffs on a wide range of technology products would help push the country's industrial innovation, analysts pointed out.

Starting Thursday, China, the world's largest IT products exporter, would cut import duties on 201 IT products covered by the Information Technology Agreement (ITA), a global technology trade pact under the World Trade Organization (WTO), according to the Ministry of Finance.

The products include integrated circuits, touch screens, semiconductors and medical devices. The government also promised to reduce tariffs to zero on these products within seven years.

Over 50 countries, including China, reached an agreement last year at a WTO meeting in Nairobi, Kenya, to begin implementing their tariff commitments to the ITA by July 1, 2016, while the timetable is subject to the completion of each country's domestic procedural requirements.

China's legislature passed a bill earlier this month to ratify an amendment to the ITA.

"The ratification and implementation of the amendment will be in the interests of China's drive to build an open economic system and to accelerate the development of domestic IT industry amid international competition and cooperation," said the National People's Congress Foreign Affairs Committee in a review report to the lawmakers.

The move meant that China would play a bigger role in participating in global resources relocation and move upper in the global industrial value chain thanks to lower import costs, according to Bai Ming, a researcher with the think tank of the Ministry of Commerce.

Global trade of the 201 IT products is valued at $1.3 trillion, about ten percent of total world trade. China's foreign trade volume of the goods is about a quarter of the amount, according to Lou Jiwei, head of the Customs Tariff Commission of the State Council.

Based on 2014 figures, eliminating these duties will cost China 15 billion yuan (about $2.24 billion) and 52 billion yuan in annual actual and potential tariff revenue losses respectively, Lou said.

The adjustment of tariffs would be conducted in a gradual manner, which would not impact China's IT industry much despite expected larger imports of less expensive IT products, said Liu Yingkui, a researcher with the China Council for the Promotion of International Trade.

Chinese IT enterprises should harness free global trade and enhance their R&D capabilities to seek wider global reach with investment, Liu added.

The Chinese government decided to raise the ratio of R&D investment on GDP from 2.1 percent in 2015 to 2.5 percent by 2020, with major breakthroughs in fundamental research and strategic technologies.