China opens its markets for global businesses
The Customs Tariff Commission of the State Council (CTCSC) has announced that China will lower or remove import duties on a number of items, commencing in 2020, in a bid to expand imports. The new tariff rates will apply to over 850 items as of January 1, including consumer goods, raw materials, medicines and information technology products. These rates will be lower than “Most Favoured Nation rates.” In accordance with this, conventional rates will be applied on products from 23 countries and regions in accordance with China’s free trade commitments.
China has made its commitment to free trade clear for a long time, this is not just rhetoric but also something Beijing aims to achieve in practice. With global trade facing unprecedented levels of risk and uncertainty, such a commitment is necessary to preserve the integrity and norms of the international system. In doing so, China is sending out a message that it offers opportunity and prosperity and that it will continue to open up its markets and reform accordingly. With the country boasting the world’s largest consumer market, one which continues to grow rapidly, many nations and businesses have sought to benefit from it. Now, it’s just become a bit easier.
Anyone who has followed China’s rhetoric closely and objectively will realize that for several years now, the country has consistently promoted the benefits of free trade and sought to expand opportunities for it around the world. While certain countries have waged aggressive protectionism in the form of tariffs and levies, Beijing has worked to upgrade bilateral and multilateral trade prospects, astutely recognizing that free trade is the only feasible way to sustained, reciprocal and continued global growth.
Thus, as China has sought to invest in infrastructure in surrounding countries to reduce the logistical and structural barriers to trade, it has in tandem sought to bring down the customs barriers to trade by securing new free trade agreements whilst upgrading present ones. Since 2018 China has secured new arrangements with the Eurasian Union (Russia, Kazahkstan, Belarus, Armenia and Kyrgyzstan) and Mauritius, while upgrading existing agreements with Singapore, New Zealand and Pakistan.
Presently, it is engaged in negotiations to secure the Regional Comprehensive Economic Partnership, of which it committed to again with South Korean and Japanese ministers on Sunday, is close to securing an free trade agreement with Norway and recently opened talks on a deal with Cambodia. Across the board, China is expanding and diversifying its free trade options and as a result, the latest tariff announcement is moving in tandem with these developments, in both aligning itself with existing commitments and also paving the way for new ones. Unarguably, it is sending out a clear message on multiple levels that the country is open for business on a reciprocal level.
This is what many businesses and countries around the world are eager to benefit from, aiming to expand their own exports into China, the country possessing the world’s largest and fastest growing consumer market. With a population of 1.4 billion and sustained growth in retail sales month upon month, there are ample opportunities for businesses to sell a variety of goods and products with far greater scope than back home. Take for example New Zealand, with a population of just fewer than five million the country does not come close even to a medium-sized Chinese city, meaning in turn the opportunities which reduced tariffs offer their own exporters are limitless.
Therefore, the tariff reductions which come into place on January 1 should be interpreted as China’s continued and growing commitment to free trade, not just in rhetoric but also in substance.
In an era of growing protectionism, Beijing recognizes that unimpeded global commerce must be upheld and strengthened with a view to upholding global and domestic growth accordingly.
From January exporters around the world will have a new opportunity to embrace the country’s growing domestic market, something which can prudently ease the hurdles of future trade agreement negotiations. Thus, in 2020, observers should anticipate China’s agreements in this area, alongside increased market access, to continue expanding.
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