2015-04-28

China Finally Gets Serious About Consumer Economy

In June, tariffs on popular consumer items will be cut in a trial run. The consumer economy has been slow to take off because the government is protecting local brands. Once the tariffs come down, consumption will rise as consumers see their disposable income increase and domestic firms are forced to up their game. This is also part of the strategy to make the yuan fully convertible. In order to add the yuan to the SDR basket, there needs to be a way for foreigners to obtain yuan through trade and investment. It's estimated that if the drop in tariffs leads to a 50% increase in imports, it will raise overall retail sales by 1%.

Some imported products, such as cosmetics, carry up to 30 per cent consumption tax. In addition, some companies must pay between 5 per cent and more than 20 per cent in import duties, she said.

I could easily see cosmetics sales doubling. L'Occitane (0973.HK) is up more than 3% in HK trading, even though the market is down today. Keep an eye on L'Oreal and other cosmetics firms in European trading.

SCMP: China to cut tariffs on popular imports in bid to boost spending
Xinhua: 降关税增设免税店 国务院“组合拳”引高端消费回流

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