Page 162 - 2020 White Paper on the Business Environment in China
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0 White Paper on the Business Environment in China
Car Ownership Vehicle Tariff Cut
China’s State Council has called on major city China lowered the import tariffs in mid 2018
governments to relax or even cancel restrictions on vehicles and auto parts. Regulators cut the
designed to limit car sales, aiming to boost a import duty on 139 items to 15 percent, down
struggling auto market now entering its third from the duties of 20 and 25 percent. Import
year of contraction. Car sales have been a major tariffs on 79 items of auto parts were lowered to
driver for the nation’s economic expansion, 6 percent from the current tariffs of 8, 10, 15, 20
posting double-digit growth for much of the and 25 percent. The average duty on imported
last decade to make China the world’s largest vehicles decreased from 21.5 percent to 13.8
auto market. But over that period many of the percent, and the average duty on auto parts
nation’s largest cities, including Beijing, Shanghai, dropped from 10.2 percent to 6 percent. The
Shenzhen and Guangzhou, have restricted their move is expected to benefit US carmakers, as
issuance of new license plates to keep congestion well as European and Asian car manufacturers.
and pollution in check. The State Council’s call to President Xi Jinping said that China would
relax or even cancel those restriction promises to “significantly lower” import tariffs on vehicles in
meet with resistance from many of those cities. the opening remarks of 2018 Boao Forum for
The August 2019 call was more broadly focused Asia. Premier Li Keqiang also proposed to reduce
on steps that could stimulate consumption as import tariffs on vehicles in his government work
China’s economy slows sharply. The document report Xi said developing China’s high-quality
pointed out that efforts to boost demand are economy must be achieved in a more open
facing bottlenecks and other shortcomings. environment. The move is one of the country’s
The State Council’s call came two months after new measures to further expand the reform
the similarly powerful National Development and opening-up process. “China safeguards a
and Reform Commission (NDRC), China’s state multilateral trade system. Lowering auto import
planner, issued its own document saying that tariffs is a major step to expand reform and
cities shouldn’t introduce new rules to restrict car opening-up,” said the Ministry of Finance (MOF).
sales, and ones with such restrictions should shift As integration between the auto industry and a
to encouraging more car use. So far, as of this new generation of technologies in areas such as
writing, only the southern cities of Guangzhou information and communication, new energy and
and Shenzhen have taken specific steps to issue new materials is accelerating, the international
more license plates. In June 2019, Guangzhou competitiveness of Chinese auto industry will
increased its quota for small- and medium-sized need to be improved. The substantial cut on auto
car license plates by 100,000 for the period from tariffs is conducive to the structural adjustment,
June that year to the end of 2020. The same day transformation and upgrading of Chinese auto
Shenzhen said it would increase its quota for industry, thus improving competitiveness and
small car license plates to 120,000 in 2019 and quality of Chinese auto products, according to
2020 from a previous 80,000 each year. Despite MOF. Government officials said that the move
the central government’s urging, at least some will also help enrich the domestic market supply,
cities are hesitant on following through with meet the diverse needs of the people, and
such relaxation. Some Beijing analysts believe provide domestic consumers with plentiful and
that congestion concerns mean it is unrealistic affordable consumption experience. “Reducing
for the Chinese capital to drop its quota on the tariffs is a factor in price cuts, but whether or
number of new license plates for new-energy not prices of vehicles will be cut and how much
vehicles it hands outs to residents. In the past, the prices fall are based on market behaviors.
China turned to tax reductions to boost car sales We hope that cutting tariffs will help drive down
when it wanted to stimulate the market. But such prices of vehicles and give consumers more
tax cuts don’t really create new demand. Instead benefits,” said MOF (PRC, China to Reduce).
those were more likely to just prompt people
who were already thinking of buying cars to do
so earlier (Liu and Yang).
162
Car Ownership Vehicle Tariff Cut
China’s State Council has called on major city China lowered the import tariffs in mid 2018
governments to relax or even cancel restrictions on vehicles and auto parts. Regulators cut the
designed to limit car sales, aiming to boost a import duty on 139 items to 15 percent, down
struggling auto market now entering its third from the duties of 20 and 25 percent. Import
year of contraction. Car sales have been a major tariffs on 79 items of auto parts were lowered to
driver for the nation’s economic expansion, 6 percent from the current tariffs of 8, 10, 15, 20
posting double-digit growth for much of the and 25 percent. The average duty on imported
last decade to make China the world’s largest vehicles decreased from 21.5 percent to 13.8
auto market. But over that period many of the percent, and the average duty on auto parts
nation’s largest cities, including Beijing, Shanghai, dropped from 10.2 percent to 6 percent. The
Shenzhen and Guangzhou, have restricted their move is expected to benefit US carmakers, as
issuance of new license plates to keep congestion well as European and Asian car manufacturers.
and pollution in check. The State Council’s call to President Xi Jinping said that China would
relax or even cancel those restriction promises to “significantly lower” import tariffs on vehicles in
meet with resistance from many of those cities. the opening remarks of 2018 Boao Forum for
The August 2019 call was more broadly focused Asia. Premier Li Keqiang also proposed to reduce
on steps that could stimulate consumption as import tariffs on vehicles in his government work
China’s economy slows sharply. The document report Xi said developing China’s high-quality
pointed out that efforts to boost demand are economy must be achieved in a more open
facing bottlenecks and other shortcomings. environment. The move is one of the country’s
The State Council’s call came two months after new measures to further expand the reform
the similarly powerful National Development and opening-up process. “China safeguards a
and Reform Commission (NDRC), China’s state multilateral trade system. Lowering auto import
planner, issued its own document saying that tariffs is a major step to expand reform and
cities shouldn’t introduce new rules to restrict car opening-up,” said the Ministry of Finance (MOF).
sales, and ones with such restrictions should shift As integration between the auto industry and a
to encouraging more car use. So far, as of this new generation of technologies in areas such as
writing, only the southern cities of Guangzhou information and communication, new energy and
and Shenzhen have taken specific steps to issue new materials is accelerating, the international
more license plates. In June 2019, Guangzhou competitiveness of Chinese auto industry will
increased its quota for small- and medium-sized need to be improved. The substantial cut on auto
car license plates by 100,000 for the period from tariffs is conducive to the structural adjustment,
June that year to the end of 2020. The same day transformation and upgrading of Chinese auto
Shenzhen said it would increase its quota for industry, thus improving competitiveness and
small car license plates to 120,000 in 2019 and quality of Chinese auto products, according to
2020 from a previous 80,000 each year. Despite MOF. Government officials said that the move
the central government’s urging, at least some will also help enrich the domestic market supply,
cities are hesitant on following through with meet the diverse needs of the people, and
such relaxation. Some Beijing analysts believe provide domestic consumers with plentiful and
that congestion concerns mean it is unrealistic affordable consumption experience. “Reducing
for the Chinese capital to drop its quota on the tariffs is a factor in price cuts, but whether or
number of new license plates for new-energy not prices of vehicles will be cut and how much
vehicles it hands outs to residents. In the past, the prices fall are based on market behaviors.
China turned to tax reductions to boost car sales We hope that cutting tariffs will help drive down
when it wanted to stimulate the market. But such prices of vehicles and give consumers more
tax cuts don’t really create new demand. Instead benefits,” said MOF (PRC, China to Reduce).
those were more likely to just prompt people
who were already thinking of buying cars to do
so earlier (Liu and Yang).
162
