China's Ministry of Finance said in a statement on May 25 that it would cut import tariffs on various products, ranging from shoes to cosmetics, by an average of more than 50 percent beginning June 1. The move is meant to spark domestic spending amid faltering economic growth.
Chinese tourists often buy goods abroad to avoid import and consumer taxes back home. Consumers in China pay around 20 percent more for luxury goods than their counterparts in Europe, according to analysts. The strengthening of the yuan against the euro and many other currencies has also made shopping abroad particularly appealing. Chinese tourists spent around $165 billion overseas in 2014, according to China's State Administration of Foreign Exchange, up 28 percent from 2013.
Most recently, Chinese tourists have privileged shopping locations in Europe, Japan and South Korea because of the depreciation of their national currencies. Visits to Hong Kong have declined instead because of the recent protests in the former British colony, leading observers to forecast a 20 percent drop in the rents paid by luxury retailers.
The Chinese economy grew by 7 percent on an annualized basis in the first quarter of 2015, its worst performance in six years, partly due to a downturn in investment and manufacturing. The country's retail sales went up by 10 percent last month, as compared to a year ago, but they were down from March levels.
Taxes on most kinds of shoes whose uppers are made with synthetic materials or textiles will be cut in half to 12 percent, while shoes with leather uppers will see duties reduced from 10 to 5 percent. Import tariffs for Western-style clothing will be cut to 7-10 percent from 14-23 percent, the Ministry said. Tariffs on skincare products and diapers will drop to 2 percent from 5 and 7.5 percent, respectively. Handbags, small leathergoods, jewelry and watches were not included in the recent measures.
Among the companies that stand to benefit from lower import duties are big athletic footwear brands like Nike and Adidas, as well as cosmetic companies such as L'Oreal and diaper makers like Procter & Gamble. Some analysts stress that the immediate impact of these measures might be limited, since import taxes are only one part of the reasons behind the price gap between China and other markets. High store rental costs and multiple layers of distribution also push retail prices up.