Memo #46
Vickie Yau – vickieyau [at] cetl.hku.hk
In September 2010, the People’s Republic of China (PRC) began strictly enforcing a new taxation rule. The new rule (Notice No.54 of 2010) claims to standardize and bring transparency to PRC borders. It will tax luxury items and electronics, limit quantities of popular household items purchased abroad, and, in effect, encourage middle and upper class Chinese citizens to shop at home.
The new rule is the latest in a series passed in anticipation of the 2008 Beijing Olympics and the 2010 Shanghai Expo. The series outlines a list of taxable items (Notice No.25 of 2007) and a lower limit of $2000RMB for the items (Notice No.72 of 2007), clearly targeting luxury goods and electronics. The rules apply to Mainland Chinese residents and foreigners, including those from Hong Kong and Macao. If the rules are enforced, they will have serious implications for cross-border consumer spending.
Without doubt, travelers will become more cautious about bringing expensive goods across the border. Mainlanders will likely spend less money abroad, impacting localities dependent on tourist spending, most notably Hong Kong and Macao. In a market survey conducted in Hong Kong, the average daily consumer expenditure by a Mainland visitor is roughly $17,800HKD (approx. $2400USD) per day. The flow of everything from computers, to clothes, to milk powder will be affected.
The underlying intent may be to curb the outflow of consumption by the growing Chinese middle and upper classes. As the Chinese yuan (RMB) appreciates against other world currencies and inflation at home intensifies, an increasing number of Mainlanders will want to travel and spend their money abroad. With border taxes firmly in place, people will have to think twice before purchasing products abroad if those products were available at home. While the actual impact of these rules has not yet been realized, one wonders whether this latest effort by the PRC government will contribute to the building of shopping paradises—the “Great Mall”—in China.
About the Author:
Vickie Yau is a graduate in Asian Studies (M.A.), University of British Columbia and currently working and studying at the University of Hong Kong
Links:
- Chinese Mainland Tourists are the Biggest Spenders in Hong Kong, Digital Marketing Inner Circle, April 2010
- Notice No. 54, General Administration of Customs of the People’s Republic of China, 2010 (in Chinese)
- Notice No. 25, General Administration of Customs of the People’s Republic of China, 2007 (in Chinese)
- Notice No. 72, General Administration of Customs of the People’s Republic of China, 2007 (in Chinese)