The price of imported products will keep dropping this year but not as dramatically as previously, although China continues to slash tariffs according to its World Trade Organization (WTO) commitments.

Since the beginning of the year, China's general tariff has been cut from 11 per cent to 10.4 per cent. Tariffs on telecommunication products dropped the most, by 71 per cent.

In line with the newly established Closer Economic Partnership Arrangement, 374 products manufactured in Hong Kong and 311 products produced in Macao have been entering the mainland duty free since January 1.

Furthermore, some tariff-friendly agreements between China and ASEAN (Association of Southeast Asian Nations) members will take effect this year, cutting the prices of imports from these countries.

The above three factors will drive down tariffs this year. However, they will not be as significant as in the past.

Tariffs on major imports, such as vehicles, electrical appliances and agricultural produce, will not experience as sharp a decrease as before.

This year's tariff cut is the smallest, compared with 2002 and 2003.

Sources from the General Administration of Customs say tariffs will be cut on 2,414 products this year.

The average tariffs on agricultural produce will drop from 16.8 per cent to 15.6 per cent, while industrial products will fall from 10.3 per cent to 9.5 per cent.

There are two categories of imported products attracting the attention of ordinary Chinese consumers -- expensive and luxurious products, such as vehicles and electronics, and agricultural produce and daily necessities, which are competitive with domestic products.

The tariffs on imported vehicles, for example, will fall by 4 to 5 per cent, which is not much when compared with last year's 9.2 per cent.

Tariffs on imported electrical products will be 9.2 per cent, down slightly from 9.9 per cent last year.

Agricultural produce, especially imports from Thailand, have been enjoying zero tariffs from the start of October last year.

Regional agreements with Pakistan, Laos, Cambodia, Myanmar and Bangladesh will allow Chinese customers to enjoy lower tariffs on agricultural produce from such countries.

Although tariffs have been cut this year, the price of imported products will not drop for sure, as value added tax or consumption tax plays a big part in the final price.

The value added tax in China is 17 per cent, which accounts for more of the final price than tariffs.

Therefore, slight tariff cuts will not have a big impact on prices.

According to WTO rules, during the transitional period, China can use some administrational measures in order to control the variety and amount of imported products, especially those with a big following domestically. This is last transitional year that China can use import quotas.

The prices of imported vehicles will likely hit a high in the first half of the year and then subside.

The country will make full use of quotas this year to control the import of vehicles, helping to keep the price of imported vehicles at the existing high level. The supply-demand situation will not change.

However, in the second half of 2004, especially toward the end of the year, customers will have a high expectation for 2005 when China will fundamentally eliminate import controls.

Thus, customers will hold back their spending to wait for 2005, which will directly shrink demand.

On the other hand, the imports of vehicles will increase, as importers will be anxious to use up their credentials, so they do not lose money.

Although China has already forbidden the trading of import licences once they are issued by the government, some agents or companies sell them to importers to make a profit.

There are quite a large number of licences on the market.

The supply of imported vehicles will rise beyond demand at the end of the year, which will drive prices down.

The variety of imported products also influences prices.

Importers usually choose products that are in great domestic locally. Under the same category, importers prefer high-quality or luxurious products that are rarely seen in the domestic market.

Take vehicles for instance, the level of imported vehicles has tended to be higher in recent years.

Although the tariffs were cut, the prices of imported vehicles did not decrease.

Statistics from GAC show that there were 36,759 vehicles imported from Guangdong port, with a value of US$1.1 billion.

Compared with 2002, the amount increased by 4.5 per cent, but the value grew by 32 per cent.

The price of each unit reached US$29,000, up US$6,000 compared with 2002.

Such a phenomenon is attributed to two reasons. The consumption capability has increased in recent years, especially in the southern part of China, and importers are moving high-class vehicles, helping them boost profits.