Burberry jumps on rumours of Chinese tax cuts

Burberry, a stock often sensitive to developments in the Chinese economic outlook, was one of the highest risers on the FTSE 100 on Thursday on the back of rumours that the country is to slash import taxes on luxury goods this year.

According to a report published yesterday in English-language newspaper China Daily, the country's former deputy minister of commerce claims that "China needs to reduce import duties" as consumer and luxury goods are important for promoting domestic consumption.

"There will be at least two rounds of reductions this year on a large range of goods," Wei Jianguo told the paper at the National Committee of the Chinese People's Political Consultative Conference (CPPCC).

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China is a key growth market for Burberry, the renowned British fashion luxury brand famous for its distinctive tartan pattern and famed trench coats. Like-for-like store sales growth in China has continued to increase by 30% during the company's first three quarters of the current financial year.

As such, reports of reduced levies on imports of luxury products will come as welcome news for investors in Burberry, seeing as though the country earlier this week reduced its gross domestic product (GDP) growth forecast to 7.5% for 2012 - the first time below the 8% mark in eight years.

Burberry's shares were trading 4.87% higher at 409p in afternoon trade in London.

It is predicted that the Asian country will become the third-largest consumer of luxury goods within three years. China Daily cites data from the World Luxury Association which showed that outbound expenditure by Chinese consumers on luxury goods during the 2012 Chinese New Year (the Spring Festival) jumped 28.7% year-on-year to $7.2bn.

"Why not take some measures to get this huge consumption flow back to China?" Liu Kegu, member of the CPPCC, told the paper.

BC