The Customs Tariff Commission of the State Council of China issued a public statement on an adjustment to Chinese import and export tariffs, effective January 1, 2024.
More than 1,000 items including certain medical products, key equipment and parts, resources in short supply, and some agriculture products, will be subject to provisional import tariff rates, which are lower than the most favored nation (MFN) tariffs.
Import tariffs on some commodities will be raised on ethylene, propylene, and liquid crystal glass substrates below six generations. Interestingly, ethylene- and propylene-derivatives and liquid crystal glass substrates beyond six generations are included in the provisional import tariff rate reduction. There are no changes in quota-based tariffs for certain agricultural goods, including wheat, while the provisional rates of export tariffs on certain agricultural and industrial products, such as animal bone-related products and refined copper, are lowered.
What does all of these mean?
Throughout 2023, the Chinese economy has been experiencing a slowdown. It is evident that the new tariff adjustment is a measure the Chinese officials implement to combat the economic crisis.
For one, the real estate fallout is battering China’s middle-class wealth and threatening its banking system. The Chinese administration’s preference for a state-led economy continues to threaten the confidence of the private sector, all while consumer demand remains low despite a brief surge following the official end of COVID-19 restrictions. Unemployment rates are alarming, exemplified best by 16-24 year olds unemployment rate reaching a record 21.3% in June 2023 just before the officials suspended reporting of unemployment statistics. Meanwhile, Western sanctions amidst sagging consumer demand have further impacted market confidence. Institutional investments in the country plunged, foreign direct investment plummeted, and rising capital outflow threatened China’s currency value.
China’s economic woe has been acknowledged by President Xi Jinping in his keynote speech at China’s annual Central Economic Work Conference (CEWC), an annual meeting of China’s top leadership to set out the economic agenda for the next year. Accordingly, in 2024, China will continue to expand domestic consumption and attract foreign capital in order to boost its economic growth.
The effect of the new tariff adjustments will be seen in the coming months. If this measure is proven effective, the stunned Chinese labor market may potentially see an export-related bounce back.