China to reduce import tariffs to boost trade – report

The Ministry of Finance in China will be reducing its car import tariff rates from 25% to 15% by July 1 in order to boost investment in the Chinese automotive industry, according to Autocar. The move to cut tariff rates is aimed at making the industry more attractive to foreign automakers, as well as to further boost electric vehicle development.

The country’s high tax rate had reduced potential investment from car makers which do not manufacture within its borders, the report said. Tesla chief executive officer Elon Musk said that China’s levy had created a skewed market, while United States president Donald Trump called it ‘stupid trade’.

The US president’s sentiment likely stems from the country’s comparatively low tariff rate of just 2.5%, and has put pressure on China to lower its own tariffs for a more level playing field. The European Union has a 10% levy on cars made outside EU borders.

China’s sheer scale makes it attractive to foreign car makers despite its cost-raising levy. A total of 23.9 million cars were sold in China last year, compared to 15.63 million sold in the European Union and European Free Trade Association nations in the same year.

Further-improved market accessibility in China is also on the cards, as the country is looking to remove foreign car companies’ ownership limits by 2022. As it is, foreign car companies can only build cars in China via joint ventures with Chinese companies, such as FAW-Volkswagen and Chery-Jaguar Land Rover.

President Xi Jinping recently outlined plans to remove the requirement for companies to each partner a Chinese firm, and own no more than 50% of the joint venture. Along with the reduced tariffs, this move is expected to make the country even more attractive to companies looking to invest in the country’s EV technology sector, the report said.

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