China’s Ministry of Finance has cut import duties on 1,585 products (defined at HS-8) with effect from November 1. The move had been widely trailed and followed on from cuts to 1,449 products from October 1, as outlined in Panjiva research of June 5. In terms of the magnitudes of reduction the new package covers $130.3 billion of products included at the HS-6 level, Panjiva analysis shows, compared to $64.3 billion in the prior round.

Where the prior round sought to improve consumer spending, the new round appears focused on helping the industrial side of the economy. The largest product areas covered include gaseous hydrocarbons (for example butanes) worth $16.3 billion in the 12 months to February 28, which should help the margins of the petrochemical-using industries such as plastics. The infrastructure industry also gets a boost with coverage of traffic control signaling equipment ($9.29 billion)

Chart segments tariffs cut by Chinese government from November 1 by product (HS-2) in terms of number of tariff lines (right) and value of wider product groups (HS-6 aggregated from HS-8, left). Data covers 12 months to February 28.   Source: Panjiva

Yet, the impact of the tariff in terms of reduced tariffs amounts to just $3.30 billion compared to $5.1 billion in the prior round. That partly reflects the small change in average rates – to 7.7% from 10.3% on a weighted average basis across the 1,088 product groups (HS-6) affected.

The most significant beneficiaries in terms of the dollar reduction in tariff value are the butane petrochemical group ($418 million due to a rate cut to 5% from 11%), lower power circuit breakers ($301 million, 10% from 14%) and the signaling devices already referred to ($186 million, 8% from 10%).

Chart segments value of tariffs cut by Chinese government from November 1 by product (HS-6 aggregated from HS-8 groups). Data based on imports in 12 months to February 28 multiplied by tariff rate reduction.   Source: Panjiva

Notably the product coverage includes areas where China is seeking to reduce the impact of the trade war with the United States. One example is the cut in duties for engine parts ($2.75 billion) and batteries ($2.49 billion). In all the new package of tariff cuts have an impact on 19% of the tariffs previously implemented under China’s section 301 retaliatory duties. There’s a particularly high ratio in inorganic chemicals (82.3% of tariffs cut), cotton (79.2%) and plastics / rubber (100%).

Chart compares tariffs cut by Chinese government from November 1 by product (number of HS-8 lines per HS-2 group, horizontal log axis) and the proportion of section 301 retaliatory duty tariff lines that have received a reduction in rates.   Source: Panjiva