China is cutting tariffs on some popular imports to boost domestic consumption, dealing a blow to Hong Kong’s retail sector which counts heavily on mainland shoppers.
The State Council announced the initiative on Wednesday including a plan to open more duty-free stores near borders while raising the purchasing cap for individual tourists, the Wall Street Journal reported.
Cosmetics are up to 50 percent more expensive in mainland China than elsewhere in the world because of tariffs as high as 100 percent, the report said, citing Japanese financial services group Nomura.
Also, China levies a 30 percent consumption tax.
These taxes have driven Chinese buyers to Hong Kong, where there are no import tariffs, to buy everything from foreign toiletries to makeup and handbags.
The government did not specify the extent of the tariff cuts.
But analysts are already forecasting that more affordable foreign goods at home will take business away from Hong Kong shops that sell products for cheaper than in the mainland.
Some stores in the former British colony derive the majority of their sales from mainland visitors.
The tariff cut comes as Hong Kong stores are already struggling.
Major shopping areas such as Causeway Bay have seen noticeably fewer tourists of late while astronomical rents are starting to show signs of softening.
Jewelers Chow Tai Fook and Luk Fook, both big with mainland shoppers, have reported a 20 percent and a 16 percent plunge in Hong Kong sales for the quarter ended March, respectively.
The number of mainland Chinese visitors to Hong Kong began falling earlier this year as currency drops in Japan, Korea and Europe drew Chinese tourists away from Hong Kong.
Some also blame rising levels of resentment in Hong Kong against mainland Chinese shoppers, particularly those who buy Hong Kong goods to sell at a discount in the mainland.
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