Blue-chip brands hope to turbo-charge spending

Blue-chip brands are slashing their prices in China to boost their bottom lines.

Household names such as Apple and fashion labels Louis Vuitton and Gucci have decided to cut their prices after Beijing reduced value-added tax, or VAT, across the board.

“World famous consumer brands have announced their decisions to cut their suggested retail prices to pass on their gains to consumers,” Xinhua, the official news agency of the Chinese government, stated.

Price tags for electronic gadgets listed on Apple’s China website have been lowered, including a discount of up to 500 yuan (US$74.6) for certain iPhone models.

Other major retailers followed suit, including Louis Vuitton and Gucci. They reduced retail prices by around 3%, according to Xinhua.

The move follows an announcement last month from German car giants BMW and Mercedes-Benz to cut the prices on a range of models in line with the drop in VAT.

China’s economy has shown distinct signs of cooling despite better than expected factory activity in March.

In a bid to kickstart spending, Beijing has trimmed personal and corporate tax, as well as VAT.

“Car manufacturers including Mercedes-Benz, BMW, Audi, Lincoln and Volvo have already cut the suggested retail prices of cars as much as 80,000 yuan over the past weeks after China announced VAT rate cut,” Xinhua reported.

“China has set out a plan for the large-scale tax cut, including lowering the VAT rate in manufacturing and other industries from 16% to 13% and that in transportation, construction and other industries from 10% to 9%.”