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The latest tax cuts are a move in the right direction of making mainland-made goods more competitive. Photo: AFP

As the economy matures, Beijing must invest in promoting the ‘Made in China’ label

Export-driven growth model is not sustainable in the long term, so the government must ensure that consumers have trust in domestic products

News of cuts to the mainland’s import duties on a range of consumer products followed the fifth consecutive monthly fall in exports – by 6.8 per cent – in November, reflecting the need for domestic consumption to spur economic growth. If this move works by prompting mainland China’s increasingly prosperous middle class to spend more at home, it will put more pressure on Hong Kong’s retail sector, which is already feeling the impact of falling demand from mainland visitors for both luxury and everyday goods.

On the other hand, it should ultimately be good for a global economy that depends heavily on China for growth, since the mainland’s investment and export-led model, already hit by weaker demand in the West and lower government spending because of infrastructure overcapacity, is not sustainable. Hong Kong would have to capitalise on this by exploiting increasing demand in the mainland’s services sector to support a growing domestic economy.

From next month, Beijing will cut import duties on more consumer products such as suitcases, sunglasses, camera parts, bags, garments and blankets, following cuts earlier this year on various items including shoes and skincare products. The mainland looks to cashed-up consumers for growth through spending at home, which accounts for only about 40 per cent of gross domestic product. The latest tax cuts are a move in the right direction of making mainland-made goods more competitive, but there is room for more, including in consumption taxes, and for reducing logistics costs, such as fees and tolls.

But first the authorities must address the lingering “Made-in-China” issue of trust in food and product safety and quality, reflected for example in the heavy spending on consumer goods by mainland tourists to Japan. Such negative perceptions call for a big investment in a campaign to build confidence in quality and safety. Otherwise, mainland consumers will continue voting with their feet.

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