China's tariff cuts no threat, says Hualing
CHINA'S slashing of import duties and the cancellation of import quotas will not harm the business of Chinese household electrical appliances manufacturer Hualing Holdings, its managing director Bi Qing says.
In a bid to quell investor concerns about the possible impact of the recent change in Chinese protection policy, Mr Bi said: 'Even if there is a 30 per cent reduction in import duties on household electrical appliances, the effect on our company will be minimal.' The huge price gap between imported products and Hualing's would mean the company would still be price competitive, he said.
A recent study showed that imported refrigerators similar to Hualing's 182-watt model, which sells at 2,800 yuan (about HK$2,600), would be 90 per cent more expensive.
He said the tariff was only one of the components of the selling price of an imported item.
A 30 per cent cut in the tariff on refrigerators would lead to a cut in the selling price of about 10 per cent.
This meant imported items would still be about 60 to 70 per cent more expensive than Hualing's and would not pose a serious threat to the company.
He said cancelling the import quota on refrigerators would lead to a rise in imported refrigerator sales, but a significant price gap would remain.
Earlier this month, China announced the abolition of import quotas on 176 items, including air-conditioners without compressors.
Mr Bi said compressors, an expensive component, still had to be imported, so it was not known how much cheaper air-conditioners would be because of the scrapping of the import quota.
There had been growing demand for air-conditioners, which had been good for the company's business, he said.
'There is increasing demand for air-conditioners, as a family may buy only one refrigerator but may buy more than one air-conditioner,' Mr Bi said. 'Such a huge potential market, we believe, cannot be monopolised by a few expensive imported brands.' Hit by a sluggish retail market in China, the company reported a 13.4 per cent drop in net profit to $47.19 million in the six months to June 30, 1995.
Mr Bi said the second half did not see any major improvement - this was not expected to come about until this year.
Product prices and raw material costs had been stable last year.