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The car sector within China automobile industry is taken as an infant sector and, as such, it has always been subject to protection against imports by means of the highest import tariff rate. On several occasions in recent years, China has made readjustments to tariff rates. The import duty has been reduced to 80% for complete cars with a displacement of three liters or less and 100% for those with a displacement of three liters or more. This is higher than for all other imported industrial goods. The tariff rates for car parts and accessories, however, are lower than for complete cars 40-50% for engines, gear boxes, driving axles, vibration reducers, clutches and breaks, 22% for tires, and 12-25% for electronic devices used in cars. To encourage domestication of car building, the state is practicing a string of preferential tariffs. Entitled to these preferential tariffs are imported parts and accessories by enterprises producing complete cars provided they meet the domestication standards prescribed by the state. Going hand-in-hand with protection by high tariff rates are non-tariff restrictions on import of automobile products under the import quota and licensing system. It is true that import quotas are playing a less important role in restricting automobile import as domestically built vehicles have become increasingly cheap and their prices on the domestic market are now closer to international prices. Despite that, a comparison between the marketing prices of imported goods and their normal tax-included prices (prices that include the custom duty, VAT and consumption tax on them) brings to light that the non-barrier duty equivalents practiced under the quota systems will still be as high as 10%-30%. Restrictions by the quota system will be even more significant on the import of medium- and high-class cars with a displacement of 2 liters or more. Since the beginning of the 1990s, the annual national automobile sales has grown at an average rate of 14.5%, and corresponding rate of increase is as high as 31% for sales of cars.
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