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VAT reduction benefits Chinese consumers as manufacturers lower costs

(People's Daily Online)    16:33, April 02, 2019

Chinese consumers are reaping the benefits of China's value-added tax (VAT) cut starting from April 1, as manufacturers lowered their suggested retail prices to distribute the gains from the tax reduction.

On April 1, Apple reduced the suggested retail price of products on its official website, flagship stores on e-commerce platforms, as well as physical retail stores. Apple iPhones are now generally 500 yuan ($74) cheaper than they were on March 31. Analysts attributed the price cut to China’s VAT reduction.

China lowered its VAT rate this Monday from 16 percent to 13 percent across the manufacturing sector. This move has led to a price cut of as much as 8 percent for Apple products. For instance, the wireless-charging Air Pods earphones are now priced at 1,558 yuan, down by 2.6 percent from the original 1,599 yuan.

Aside from Apple, multiple enterprises have also taken action and declared price changes.

China Railway announced on March 31 that it would lower the price of general rail transportation and cancel six incidentals to benefit lower stream industries. It is estimated that China Railway will pass a saving of 6 billion yuan to its customers and relevant enterprises each year.

The auto industry was also quick to respond to the VAT cut, especially luxury brands. Beijing Mercedes-Benz Sales Service Co., Ltd. decided on March 15 that it would lower its prices in China. Slashed prices of Mercedes-AMG models created savings of up to 64,000 yuan, and the Mercedes-Maybach saw price cuts of up to 60,000 yuan.

Mercedes’ rival BMW announced on the same day that it would lower the suggested retail price of its products, including domestically produced vehicles in China such as the BMW 3 and BMW 5 series.

Cross-border consumption is another sector that has benefited from the price cut, and its consumers have become the most direct beneficiaries of the policy. “For consumers, these are tangible benefits,” said Wang Haoyang, an executive responsible for the cross-border business at Tmall, an online shopping site under Alibaba.

For instance, a 2,000-yuan child car seat on Tmall is now 42 yuan cheaper thanks to the tax cut. Additionally, various cosmetics and luxury brands also lowered their prices on the platform, with an average reduction of 3 to 5 percent.

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Web editor: Bianji, Hongyu)

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