China To Cut Auto Import Tariffs, Ease Access For Foreign Investments After Trade War Truce

by Ike Obudulu Posted on May 22nd, 2018

Beijing, China: China will cut import tariffs on vehicles and auto parts starting July 1, the Ministry of Finance (MOF) announced Tuesday according to state media.

For car imports, the 25-percent tariff levied on 135 items and the 20-percent duty on four items will both be slashed to 15 percent, down 40 percent and 25 percent respectively.

Import tariffs for 79 items of auto parts will be reduced to 6 percent from the current levels of 8 percent, 10 percent, 15 percent, 20 percent, and 25 percent, down 46 percent on average.

“China safeguards a multilateral trade system. Lowering auto import tariffs is a major step to expand reform and opening-up,” the MOF said.

After the move, the average tariff rate on vehicles will stand at 13.8 percent, while that on auto parts will be 6 percent. The adjusted rates will be “in line with the reality of the country’s auto industry,” the ministry said.

Cutting auto import tariffs to a significant degree will help the advance of supply-side structural reform, benefit the structural adjustment, transformation, and upgrading of the auto industry, and guide the improvement of quality and efficiency in auto products, according to the ministry.

It will also enrich domestic market supply and meet the diverse needs of the people to provide more plentiful and affordable consumer experiences, the ministry said.

Ford and Porsche, maker of the Cayenne and Panamera car models, welcomed the announcement.

“We welcome China’s announcement to reduce auto import tariffs,” a Ford spokesperson said.

“Chinese customers will have a chance to enjoy an even optimized price and pursue more personalized options when buying a car,” Porsche said in a statement in China.

Shares of Ford, General Motors and Tesla all rose on the news, gaining about 1 percent in premarket trading Tuesday.

China is a big market for these automakers. GM sold more than 4 million cars in China last year for the first time, while Tesla doubled its revenue from China to $2 billion in 2017. Ford, meanwhile, sold 1.19 million vehicles in China in 2017, a 6 percent slowdown from the previous year.

At the Boao Forum in April, President Xi Jinping reiterated China’s commitment to reduce import tariffs on vehicles.

Of the $51 billion of vehicle imports in 2017, about US$13.5 billion came from North America including sales of models made there by non-U.S. manufacturers like BMW. China imported 280,208 vehicles, or 10 per cent of total imported automobiles, from the U.S. last year, according to China’s Passenger Car Association, an industry trade body.

A duty cut would typically benefit luxury carmakers or manufacturers, like Tesla, that don’t have a local production site. Most automakers produce mass-market models in China.

For Tesla, a tariff cut will provide a boon until the company manages to set up local production. The Palo Alto, California-based company has been working with Shanghai’s government since last year to explore assembling cars in China. China saying that it will allow foreign new-energy vehicle makers to fully own auto factories as early as this year removed a primary hurdle for founder and billionaire Elon Musk.

Luxury sales leader Audi, part of Volkswagen, has been making cars in China since 1990s. General Motors Co.’s Cadillac, which has relegated Lexus to fifth in the luxury-car rankings, opened a factory in Shanghai in 2016.

Foreign carmakers have long pleaded for freer access to China’s auto market, while its own manufacturers are expanding abroad. In April, China announced a timetable to permit foreign automakers to own more than 50 percent of local ventures.

China moves to offer easier access for foreign investment

China is quickening preparations for the introduction of new practices to cut red tape for business filing and registration of foreign-invested enterprises (FIEs) as part of efforts to attract more investment inflows, authorities also said on Tuesday, according to state media.

Starting June 30, China will adopt single form and one-stop services to allow FIEs to conduct business filing and registration online free of charge, without the need for paperwork or presence in person.

To get ready for the new rules, local authorities have formulated action plans and stepped up technical preparations, Vice Minister of Commerce Wang Shouwen disclosed at a press conference.

Since last year, Beijing has piloted the practice, which offered services to more than 600 businesses and has proved to be effective in cutting their costs, according to Wang.

The move came as China has been pushing for easier access for foreign investment, with an array of favorable policies rolled out this year.

According to a statement released after a State Council executive meeting earlier this month, China will streamline procedures for the establishment of foreign-funded companies in order to promote trade and facilitate investment.

Data showed China witnessed fast growth in new foreign-funded companies in the first four months this year thanks to those policies.

The number of new foreign-funded companies surged 95.4 percent year on year to 19,002 in January-April period, data from China’s Ministry of Commerce showed.

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