Tariff Cut Expected to Help Expand Foreign Trade

China said it will cut the import tariffs to an average of 12 percent in 2002 from the current 15.3 percent to fulfill its World Trade Organization (WTO) commitments.

The country will cut import tariffs on industrial products to 11.6 percent starting January 1, the Ministry of Finance said Tuesday when China officially became a WTO member.

The country will also cut import tariffs on farm products to 15.8 percent, the ministry said, without giving the current level of duties.

The tariffs on textiles will fall to 17.6 percent; on electronics to 10.7 percent; and on machinery products to 9.6 percent, the ministry said.

China has already cut tariffs five times between 1992 and 1999, lowering the average import tariff level from 43 percent to 17 percent.

It also promised to drop its tariff level to 10 percent by 2005. The average tariff level of all WTO members is now about 6 percent. It stands at 3 percent in developed countries and 10 percent in developing ones.

Economists said the tariffs cut is "necessary,'' because China has yet to integrate itself into the international market.

"The cut in the import tariffs will be beneficial to further expanding China's foreign trade, especially imports,'' said Li Jingwen, an economist with the Chinese Academy of Social Sciences.

More imports only mean more tariffs, Li said.

"The tariff cut will not have much effect on China's fiscal revenue and the country's sound economic development,'' he said.

He said China's fiscal system is strong enough to deal with any further tariff cuts in the coming years.

State Administration of Taxation figures indicate that China's tax revenues -- excluding those from customs duties and agriculture taxes -- reached 1.3 trillion yuan (US$151 billion) during the first 10 months of this year, a year-on-year increase of 21.1 percent.

"China's WTO accession will further stimulate the national economy, which will give more resources to the taxation administration,'' Li said.

An earlier report from the academy predicted that in 2002, the growth rate of the gross domestic product (GDP) would be around 7 percent to 8 percent or even higher than the 7.5 percent predicted for 2001 if no major global crisis occurred.

"A growth in GDP stemming from the WTO entry will naturally lead to more tax revenue,'' Li said.

And because an increasing number of foreign companies will invest in China in the coming years, the country will collect more company and individual income taxes, Li said.

(China Daily December 12, 2001)

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China's WTO Entry

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