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China Cuts Import Tariffs to Aid Consumer Spending

China’s Ministry of Finance has said  it will cut import tariffs on consumer products, including apparel, as part of a drive to lower costs and spur domestic consumer spending.

The move, which takes effect on Dec. 1, will see deep cuts to import tariffs on 187 imported products. After the cut, tariffs on the consumer products–which also include food, health supplements, pharmaceuticals and recreational products–will average 7.7% percent, down from the current 17.3%, the Ministry of Finance said.

“People’s consumption demands are ever increasing,” the ministry said. “(The tax cuts) will benefit the choices available to consumers domestically, and help upgrade the domestic supply system.”

Beijing faces pressure from the U.S., Europe and other trading partners for better access to its growing market. But the range of 187 products affected by the latest cuts was relatively small and it was unclear how China’s trade balance might be affected, news outlets and analysts noted.

In recent years, China has cut import tax rates on products including cosmetics and apparel in a bid to spur domestic spending as the government has steered policy toward a consumption-driven economy.

China reported a $510 billion global trade surplus last year, although total trade contracted in a sign of weak foreign and domestic demand.

[Read more about China’s economy: US Reaffirms China’s Non-Market Economy Status—What it Means]

President Trump has made narrowing the U.S. trade deficit with China a priority, amid concern that his focus on trade in goods might distract attention from issues such as increasing foreign access to finance and other industries in China’s state-dominated economy. The tariff cuts followed Trump’s visit to Beijing during which the two sides signed a multibillion-dollar series of contracts in a tradition aimed at blunting criticism of Beijing’s trade surpluses and market barriers.

Earlier this month, the U.S. Commerce Department concluded that China remains a non-market economy country for purposes of assessing antidumping duties. The International Trade Administration explained that at its core the framework of China’s economy is set by the Chinese government and the Chinese Communist Party, which exercise control directly and indirectly over the allocation of resources and do not seek economic outcomes that reflect predominantly market forces outside of that control.

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Looking at a broader picture, China’s gross domestic product growth remained robust in the third quarter, increasing 6.8% year-on-year, easing marginally from the 6.9% growth recorded in first and second quarters this year, compared to a year earlier.

Rajiv Biswas, Asia Pacific chief economist for IHS Markit, noted in a report that China’s growth engine continues to be household consumption, which contributed 64.5% of total GDP growth in the first three quarters of 2017–2.8% higher than the same period last year.

Exports also performed well in the first nine months of 2017, rising by 12.4% year-on-year, propelled by growth in shipments of mechanical and electrical products, which increased 13 percent and accounted for 57.5% of total export value.

“Sustaining such rapid growth of high-tech manufacturing indicates that the Chinese government’s Made in China 2025 policy is succeeding, which is critical to the vision outlined by President Xi in his speech to the 19th Party Congress to transform Chinese enterprises into world class, globally competitive firms,” Biswas said.

In the apparel and textile industry, the policy includes moving away from a low-cost manufacturing model to one of producing value-added merchandise and an upgrading of factories through state-of-the-art technology and machinery. There’s also a concerted effort to manufacture more for the domestic market instead of relying on imports to serve consumers.