Why Are Items Pricier in China? From iPads to Starbucks to ice cream and cars, the price of many goods is far higher in China than in many other countries. But consumers there are wising up

September 3, 2013, 7:43 p.m. ET

In China, Veil Begins to Lift on High Consumer Prices

Resistance to Prices Grows Amid New Ways to Comparison Shop

LAURIE BURKITT

BEIJING—In China, consumers pay nearly $1 more for a latte at StarbucksSBUX +1.53% than their U.S. counterparts. A Cadillac Escalade Hybrid Base 6.0 costs $229,000 in China, compared to just over $73,000 in the U.S. Welcome to China’s modern retail world, where the price of many goods is far higher than in many other countries, a disparity that is all the more stark considering the income differences. A basic iPad 2 is priced at $488 in China, where average per capita income is around $7,500. The same tablet is $399 in the U.S., where average per capita personal income totals $42,693. Clothing and other apparel is on average 70% more expensive for consumers in China than in the U.S., according to data from SmithStreet, which compared the prices of 500 items of 50 brands in both countries.Government taxes and import tariffs are to blame for a lot of the price discrepancy, but for years the burgeoning Chinese middle class also seemed willing to pay more for products with consumer cachet, particularly imported goods. And companies happily charged what the market would bear, even finding high prices could help provide a quality halo effect, winning customers psychologically. In many cases, when foreign manufacturers charged more, Chinese producers followed suit.

But today more Chinese consumers are pushing back, weary of sticker shock—and enlightened by the ability to compare prices elsewhere, thanks to the Internet and increased travel abroad.

Disgruntled shoppers like Guan Honglei, a 30-year-old finance worker who will shop only on overseas websites or in Hong Kong, have big implications for retailers that have raced to expand brick-and-mortar stores in mainland China.

“It’s not worth shopping in China,” said Mr. Guan, adding, “If you can wait, do it elsewhere.”

With increased travel and e-commerce, consumers are comparing overseas prices with what they see in China-based stores and are waiting to buy goods when abroad, said James Button, a senior manager at Shanghai-based consultancy SmithStreet. This year Chinese shoppers made global headlines by clearing out U.K. and Hong Kong grocery shelves of baby formula, which wasn’t only less-expensive than formula found inside China, but was also widely perceived by Chinese consumers as safer.

As China aims to build a more balanced economy that is consumption-driven, regulators have begun cracking down on companies they believe have unfairly swayed pricing in the market.

Authorities recently fined five local jewelry retailers a combined 10.6 million yuan for price manipulation. And in August economic planners launched pricing investigations of the auto, pharmaceutical and baby-formula sectors, looking for prices that were higher in China compared to other locations.

They fined foreign infant-formula makers such as Danone SA and Mead Johnson Nutrition Co., claiming they violated competition laws.

The baby-formula companies responded to scrutiny by slashing prices of products sold in China.

The auto and pharmaceutical investigations are continuing.

Beijing is attempting to ensure that profit margins don’t come at the expense of the people, said Rocky Lee, head of the Asia corporate practice at law firm Cadwalader Wickersham & Taft in Beijing.

On luxury goods, authorities have had few qualms about causing sticker shock, boosting prices of import and luxury products like the Escalade, which is slapped with a consumption tax totaling around 386,000 yuan ($63,000).

General Motors Co. GM +0.18% said imported cars make up a small segment of their business in China. A China-built Buick Encore costs Chinese consumers $24,477, while it costs U.S. counterparts $24,160, according to a spokeswoman.

Many companies that have for years earned higher profits in China by selling to consumers who wanted premium products and status symbols, said Yuval Atsmon, a principal at consultancy McKinsey & Co.

Apple Inc. AAPL +0.28% declined to comment on iPad pricing disparities.

Experts say that price tags often also reflect the inefficiencies companies face in the Chinese market. “It can take months upon months—passing tests and getting licenses—to open a retail store in China. Permits and bureaucracy cost; all of that is passed on to the consumer,” Mr. Lee said.

Brands such as Starbucks and Häagen-Dazs have set higher prices for Chinese consumers to cast an image of higher quality and create “snob appeal,” Mr. Atsmon said.

A scoop of rum raisin ice cream costs $5.40 at a Haagen-Dazs shop in Beijing. In a Chinatown Häagen-Dazs location in Washington, D.C., it goes for $4.68, including tax.

A spokeswoman for Starbucks Corp. said that prices vary by market and in China, customers like larger stores with more seats, which accounts for higher real estate costs built into the price.

A General Mills Inc. GIS -0.26% spokeswoman said the company can’t comment on the comparison of the Häagen-Dazs strategy in China versus the U.S. because the ice cream brand is marketed by General Mills in China, while in the U.S. it is owned and run by Nestlé SA.

Not all goods in China are more expensive than elsewhere in the world. In the keenly competitive beverage market, where volume sales and market share are a top priority, a can of Coca-Cola in a Chinese convenience store is about 2.8 yuan, or $0.46, while in the U.S. it costs more than $1.