Impact will probably be limited, experts say
Experts said on Sunday that the Chinese auto industry is now in a much better position to face competition deriving from lower tariffs and that the impact of lower tariffs on the Chinese auto market and foreign carmakers' localization strategy in China would be limited.
The comments came after a top Chinese economic policymaker signaled last week that China would "gradually" reduce tariffs on imported cars, reiterating earlier pledges made after U.S. officials complained that the tariff levels were unfair and were contributing to the U.S.' trade deficit with China.
In a speech at the World Economic Forum in Davos, Switzerland on Thursday, Liu He, director of the General Office of the Central Leading Group for Financial and Economic Affairs, said that China would lower tariffs on imported cars as part of its broader efforts to further open up the Chinese market to foreign goods and services.
"China will further step up efforts to [lower tariffs on imported goods]. For example [China] will gradually reduce tariffs on imported cars," Liu said, pointing out that China cut tariffs on 187 imported goods from 17.3 percent to 7.7 percent in 2017.
Liu's comments followed an earlier commitment made by the Chinese foreign ministry in November during U.S. President Donald Trump's state visit to Beijing.
U.S. officials had reportedly brought the issue to their Chinese counterparts on multiple occasions prior to the visit, asking Chinese officials to provide a level playing field for U.S. carmakers.
Zheng Zeguang, a vice foreign minister, said on November 9 that China would "gradually and appropriately" lower tariffs on imported cars. He added that China would start to ease the 50 percent limit on foreign ownership in joint ventures for electric cars and other new-energy cars in the country's free trade zones by June 2018.
Liu and Zheng did not provide a timetable or other details of the tariff reduction plan. China currently levies tariffs of up to 30 percent on imported cars.
However, the repeated pledges from top government officials indicate that China is going to follow through with the tariff reduction, said Mei Xinyu, a research fellow with the Chinese Academy of International Trade and Economic Cooperation.
Domestic benefits
"I think officials are increasingly convinced that the Chinese market is in a much better situation now and that increased competition from foreign car companies will be conducive to the development of the domestic industry," Mei told the Global Times on Sunday.
Mei noted that the move is in line with China's overall opening-up process and could ease tension with the U.S. over this issue. "I think it's a positive step that China can take," he said, adding that carmakers from Europe, the U.S., Japan and South Korea would benefit from the move.
However, Wang Xin, a long-time auto industry observer, said that the impact of lower tariffs might not be as great as U.S. officials are hoping.
"Even if China does lower tariffs on imported cars, it won't mean much, because the number of imported cars accounts for only a small fraction of China's car sales," Wang, who also runs online industry news site Auto Prophet, told the Global Times on Sunday.
In November 2017, China produced 3.08 million cars compared to about 122,500 imported cars, according to figures from the China Association of Automobile Manufacturers.
Furthermore, Wang said that foreign carmakers' localization strategy in China is based on a number of market factors and a reduction in tariffs will not change that.
