China will significantly cut auto import tariffs from July

China will slash import tariffs for automobiles and auto components by a substantial margin starting July 1, as part of its efforts to further open up the world's largest car market.

Workers assemble a car at Yudo New Energy Automobile. [File photo: Xinhua]

For cars, the 25-percent tariff levied on 135 items and the 20-percent duty on four items will both be cut to 15 percent. The items cover passenger cars and certain trucks.

Import tariffs on 79 auto parts will all be reduced to 6 percent from the current levels of 8-25 percent.

After the cut, the average tariff on vehicles will stand at 13.8 percent, and 6 percent on parts.

The Ministry of Finance says the new rates are in line with the reality of the auto industry in the country.

The Ministry says whether China will continue to cut auto import tariffs depends on the competitiveness and development of the auto industry.

It says cutting auto import tariffs will help supply-side structural reform and the upgrade of the auto industry, bringing greater quality and efficiency.

Experts say global auto companies will become more active in the Chinese market, and through trade and investment, China could become one of the world's most competitive auto markets.

"From the global perspective, the tariff reduction will play an active role in promoting the global economic growth and employment, and will make direct contribution to the production and employment growth of car exporting countries," says Liu Shangxi, head of the Chinese Academy of Fiscal Sciences.

He says the tariff cut is expected to increase competition in the domestic auto industry.

"With this large-scale tariff reduction, the market competition for Chinese auto producers will be further intensified. And a catfish effect will thus be created under such circumstances by reducing the import tariffs on vehicles, as the policy will largely accelerate the transformation and upgrading of domestic Chinese auto producers, and promote the supply-side structural reform of the auto industry," Liu adds.

The Ministry of Finance says it hopes the latest move will help to enrich the domestic market and meet consumers' demand for more affordable consumer experiences.

However, the Ministry has also stressed that tariffs are only one of the factors in car pricing, and whether and by how much prices go down are market phenomena.

With lower tariffs, the value-added taxes and consumption taxes on auto imports will decrease accordingly.

At the opening ceremony of the Boao Forum for Asia Annual Conference in April, President Xi Jinping said China will significantly lower import tariff rates for vehicles and take the initiative to expand imports as part of efforts to further open the Chinese economy to the world.

In 2017, China produced more than 29 million vehicles and sold just 120,000 units shy of that figure, up 3.2 percent and 3 percent respectively.

China has remained to be the world's largest auto market in terms of production and sale for nine years. The country imported over 1.2 million vehicles last year.