Lower tariffs on imported components will make it more attractive for global manufacturers to do much of their final assembly in China, since they will not have to pay as much to import high-tech parts made elsewhere.
Cementing China’s role as the leading country for car assembly will help Beijing move the economy toward more sophisticated industries that can provide well-paid jobs for an increasingly well-educated population. Through a process Chinese officials call supply-side reforms, they hope to close older, smokestack industries that offer little more than low wages and high pollution.
Tariffs will be reduced, the Finance Ministry said in a statement, “in order to further expand reform and opening up, promote supply-side structural reforms, promote the transformation and upgrading of the auto industry, and meet the people’s consumer demand.”
It also hopes to ramp up exports of cars made in China, and reducing its own tariffs makes it less likely that Chinese-made cars will be hit by retaliatory tariffs.
German luxury carmakers and German manufacturers of high-technology brakes could also be winners. While all of the world’s major auto parts manufacturers now have extensive operations in China, a handful of the most sophisticated components, notably advanced braking systems, are made only in Germany.
Chancellor Angela Merkel of Germany is scheduled to meet Mr. Xi in Beijing this week. The Chinese government is eager to gain her support in its trade struggles with the Trump administration, at a time when Germany’s business elite is deeply worried about Chinese acquisitions in the robotics and auto parts sectors.
Ford still exports some Lincolns to China, and Tesla exports large numbers of electric cars to China despite the current tariff. General Motors has already moved to China practically all of its production for the Chinese market, including Cadillacs, which are now made in Shanghai.