On May 30, the executive meeting of the State Council confirmed that it decided to reduce the import duties on consumer goods in daily use to better meet the diverse consumer needs of the people. The meeting decided that starting from July 1 this year, the average tariff rate on imports of clothing, shoes, hats, kitchens and sports and fitness products should be reduced from 15.9% to 7.1%.

Subsequently, on May 31, the State Council Customs Tariff Commission issued the "Announcement on Reducing the Import Tariff of Imported Consumer Goods." According to the announcement, the reduction of the MFN tariff rate of some imported consumer goods involves 1,449 tax items. As a result of the MFN rate adjustment, starting from July 1, 2018, the provisional tariff rates of 210 items of most favored nations for imported goods were abolished, and the provisional rates of most favored nations for other products continued to be implemented.

What changes will bring to the market pattern? What will be a major challenge to the apparel industry in China if the tariffs on imported garments are drastically reduced?

How to read the tax reduction list?

Of the 1,449 tax reduction items, about 430 are related to textiles and clothing, accounting for about 30% of the total number of tax reduction items. Xu Yingxin, vice president of the China Textile Industry Federation, said in an interview with a reporter from China Textile News that the scope of the apparel products in the list and the tax cuts are relatively large. Among them, the tariffs for most of the apparel products fell from 16% and 14% to 6%, and the tax reduction rate was more than half. Only a few categories remained at 8%, 10% and 12%. After the tax reduction, the overall import tariff of garments is close to that of the EU. The MFN tariff rate is far lower than that of the United States, which reflects the overall goal of “enhancing the formation of a new pattern of openness” established at the 19th National Congress of the People’s Republic of China, as well as actively sharing the market and expanding the opening up. Mentality.

It is understood that the China Textile Federation had previously submitted relevant recommendations to the Ministry of Finance. From the tax reduction results, it is recommended that some products be adopted.

Xu Yingxin analyzed that from the perspective of China’s imported clothing pattern, Italy and Vietnam are the two most important source countries for China’s imported clothing. According to customs statistics, China imported 3.81 million pieces of clothing from Italy in 2017, with a total amount of about 810 million U.S. dollars. The average unit price of imported clothing is as high as 200 U.S. dollars, mainly high-grade garments. The clothing products imported from Vietnam in China are mainly the fast fashion brands that are popular in the market, among which the knitted apparel is more prominent, and it is also the representative of China's general demand products.

The reporter noted that statistics from the General Administration of Customs show that last year China’s imports of garments from the above two countries maintained high growth rates of 12.9% and 22.2%, respectively. On the one hand, Italian high-end clothing has a strong brand effect and appeal in the minds of consumers. Its fashion design, quality and craftsmanship are recognized by the Chinese consumer market; on the other hand, it reflects the fast fashion of Chinese residents' basic needs. Consumer products also have strong demand.

Which benefits worth the wait

The reporter noted that in this list, products such as men's knitted or crocheted coats, suits and casual suits made of wool and synthetic fibers, as well as synthetic fiber knitted or crocheted women's suits and other products, are subject to import tariffs. Both are significantly reduced from 25% to 10%, which undoubtedly has great appeal for consumers.

For consumers, the most important concern is how much the market price of imported clothing can drop and how much it will fall. Analysts pointed out that the sales price of imported apparel products, including imported product prices, import taxes, and commercial circulation, constitutes a part of the cost, it is difficult to simply use a decline or digital ratio to summarize. How much consumers will benefit from it, and they need data to speak. However, it can be determined that after the tax reduction will bring more complete market competition, will attract more foreign brands and design products into the Chinese market, the richness of market products will increase, and consumers will have greater choice.

How big is the industry facing

Xu Yingxin believes that after this tax reduction, the countries represented by Italy and China that have not signed a free trade agreement will benefit the most. For example, Italian clothing known for its design, quality, and brand strength will have greater market space in China.

In addition, with the transfer of the textile processing industry to Southeast Asia in recent years, Vietnam is becoming a production and procurement base for international fast fashion brands. The advantages of fast fashion brands will further consolidate the growth of Vietnam's garment market share. The free trade agreement between China and ASEAN has been implemented since 2010. Zero tariffs have been imposed on imports from ASEAN, and Vietnam has also become a major source of clothing imports in China. Last year, China imported nearly 1 billion U.S. dollars worth of garments from Vietnam, accounting for 14.5% of China’s imported clothing, and it is expected to continue growing at a high level in the future.

So, will Chinese garment companies face greater challenges? Xu Yingxin believes that from an industry perspective, companies should face this matter with a positive attitude. At present, China's textile and apparel supply chain has a high level of operational efficiency and has strong international market competitiveness. The further opening of the market will objectively promote the transformation and upgrading of the industry and promote the improvement of quality, variety and brand.

Some industry sources have pointed out that if China reduces the import tax, the increase in imported clothing will stimulate local brands to participate in competition and study enthusiasm. Local brands have the stage to compete with world brands without going abroad, and can accumulate more experience in participating in market competition. Therefore, from this perspective, the tax reduction has a positive significance.