Why are Chinese goods more expensive at home than abroad?


"Why do Chinese people go abroad to buy goods produced in China? Because they are cheaper overseas,” Liu Mingkang, former chairman of China Banking Regulatory Commission, said when he attended the Boao Forum for Asia. Liu's words again caused concern of the public.

Go abroad to buy Chinese goods

A pair of Levi’s jeans made in China only sells for 200 to 300 yuan in discount stores in the United States but sells for at least 700 yuan in discount stores in China.

The price difference for electronic products is even larger. For example, an iPhone 4S (16G) assembled in China sells 4,988 yuan on official websites of China but sells for 649 U.S. dollars on American official websites, equivalent to about 4,087 yuan.

According to investigations from the Ministry of Commerce of China, the price of 20 brands of five products, which are wrist watch, bags and suitcases, clothes, liquor and electronic products, is 51 percent higher than in the United States and 72 percent higher than in France.

Tax and high circulation costs are the main reasons

Sun Lijian, deputy president of the School of Economics of Fudan University, said that due to the logistics costs, the products made in China should be more expensive abroad. However, it is just not so. It indicates that China’s tax system is unreasonable.

Dong Zhiyong, deputy president of the School of Economics of Peking University, said that there are many factors influencing the price of commodities and tax is just one of the factors. Marketing and pricing strategies, circulation costs, rents and even the tax exchanges are the reasons causing price difference.

The trade cost of manufacturing enterprises is higher in Chinese domestic market than in foreign markets. Therefore, the domestic price of products made in China is higher, said Yin Xiangshuo, vice president of the School of Economics of Fudan University. Although China has huge domestic market, the economic and social development levels in different areas are quite different. Due to the local protectionism caused by system of tax distribution, there exist trade barriers in different provinces. Until today, the domestic market is not united, which directly led to high costs of market entry.

Transform growth mode through reforms

In fact, besides the 17 percent of value added tax, the high cost in domestic circulation has become the main factor pushing up prices. In addition, paying attention to exports but neglecting consumption also is an important factor. The domestic manufacturers do not develop the domestic consumer market but often export their products in order to get a small amount of export rebates. Yin Xiangshuo said that expansion of domestic consumer market is a key factor to reduce trading costs and create a good market environment for enterprises.

Liu Mingkang said that China needs growth. Without growth, there would be no profit, no research and innovation and no way to change China from a world factory into a world design center. Therefore, China must further promote the reform and opening up to transform the mode of growth and achieve sustainable growth.


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