P&G and Nestle stand to gain from lower import tariffs
China's new plan to slash import taxes on a wide range of consumer goods promises to boost the prospects of multinationals in the Chinese market, with everything from Procter & Gamble Co's diapers to Diageo products becoming more affordable to local consumers.
Tariffs for 187 product categories will drop from an average 17.3 percent to 7.7 percent after the cut takes effect on December 1, the Ministry of Finance said in a statement on Friday, citing the need to help consumers access quality and specialty products that aren't widely produced locally.
The new policy follows President Xi Jinping's call at the October Communist Party of China National Congress to meet citizens' demands for improved living standards and better quality products in the world's largest consumer market.
Foreign multinationals stand to benefit as middle-class shoppers seek out goods stamped with foreign brands, while the cuts also encourage consumers to spend at home rather than on trips overseas.
"It's aimed at three things: helping boost consumption in China, reforming the Chinese economy by continuing to open it up, and sending a signal to the world and particularly to the US that it is committed to advancing global trade," said Shane Oliver, head of investment strategy at AMP Capital Investors in Sydney.
Tariffs for some types of baby formula were cut to zero, triggering losses in Chinese dairy stocks. Shares climbed, meanwhile, for European food and beverage companies.
The moves will help companies like Danone and Nestle that compete with local brands in the large market for infant formula. That industry will see sales increase about 15 percent to 123bn yuan ($18.7bn) in China by 2020, according to a Goldman Sachs Group report in October.
Chinese parents worried about a series of food-safety scandals often favour foreign brands.
"This is very good news for Nestle, and excellent news for its infant milk formula," said Jean-Philippe Bertschy,
(China Daily USA 11/27/2017 page1)
