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Australian companies hit by China's new tax plan


04-20-2016 05:46 BJT

Shares have fallen dramatically in some Australian companies - following China’s new tax plan for cross border e-commerce retail sales. But experts don't expect the move to have a long term impact - especially for Australian companies that have profited from increasing Chinese demand.

Investors in Aussie supplement maker Blackmores were rattled this week - after China announced it was changing its tax policy on e-commerce retail sales.

"Some companies will claim there is damage to their stock worth, the values of their companies have gone down," Stewart Jackson with University of Sydney said.

Stock values dropped for several Australian companies specialising in consumer-based good. Especially Items that have been in increasing demand from Chinese consumers. It’s still unclear which items will be subjected to the tax.

In 2015, Chinese tourists visiting Australia’s shores spent more than $6 billion USD here. What’s even more significant is that each person spent on average about $5,000.

Analysts believe some of that spending was driven by China’s rising middle class - and an increasing appetite for Aussie products including infant formula and health supplements. Which is why they believe the new tax system won’t having a lasting impact here.

"Even if we take into consideration the increased tax, we talk about infant formula. If the Chinese customers were to purchase infant formula through the website it is worth roughly around $50 however if they purchase it through the store it is still worth around $80 so despite the tax it is still an advantage," Raymond Chan, managing partner with Morgans Financial Limited, said.

"This is the one that always makes headlines, baby food products where there have been problems with tainted products - people will go, well I will get that overseas where I know the product is good," Jackson said.

That’s why some analysts expect those companies currently dealing with rattled investors - to continue to benefit from cross border sales down the road.

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