FTA won’t Hurt Watch Sales in HK

by swisscham in Business

On May 25, during the visit of Premier Li Keqiang to Switzerland, the two countries signed a MoU at the conclusion of free trade talks and reached consensus on a bilateral free trade agreement (FTA), the first of its kind between China and a major Western economy, lifting cooperation to a new stage. Some Hong Kong companies worry the agreement will bring major influences to the business of watch corporations, as prices in the two places will be more or less the same, which enables mainlanders to purchase watches in other places. There is no doubt that the tariff abatement encourages China’s import of Swiss goods, but it won’t significantly cut the retail price on the mainland. At the moment, the mainland imposes an 11% import duty and a 17% value-added tax on these watches; furthermore, if a watch is worth more than RMB 10,000, an extra 20% on luxury goods will be imposed. Of these three taxes, the customs accounts for the least proportion, and the other two are not affected by the FTA, and thus not in the abatement range. Therefore, the 60% tax reduction does not necessarily imply a corresponding reduction in retail price.

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