Data on Monday showed profits for China's industrial firms dropping in April on slowing demand and manufacturing activity, suggesting the previous month's rebound may have been a one-off and added pressure for policymakers to step up support for a cooling economy hit by a bitter trade war with the United States. Industrial profits dropped 3.7% year-on-year to 515.4 billion yuan (US$74.80 billion) in April, partly due to a high base of comparison in the previous year, according to data published by the National Bureau of Statistics (NBS) on Monday. That compared with a 13.9% surge in March, which was the biggest gain in eight months. For the first four months, industrial firms notched up profits of 1.81 trillion yuan, down 3.4% from a year earlier, compared with a 3.3% drop in the first quarter this year.
US-China trade frictions escalated suddenly this month, reversing the apparent progress in dialogue seen earlier this year, as US President Donald Trump raised tariffs on US$200 billion worth of Chinese goods and threatened to slap tariffs of up to 25% on another US$300 billion Chinese imports.
The US has also put the Chinese telecom equipment giant Huawei Technologies Co. Ltd. to a blacklist, effectively banning the company to do business with US firms. Profits in telecommunications and electronic equipment manufacturing, which are more vulnerable to US tariffs than other product classes, declined 15.3% in January to April, worsening from a 7.0% drop in the first three months.
Premier Li Keqiang said on Friday China aimed to keep value-added taxes for the manufacturing industry at low levels and encourage companies to innovate, a move that Li said will ultimately help create jobs and maintain sustainable economic growth.
China's financial regulators said on Friday the country's banking and insurance regulator will take control of Inner Mongolia-based Baoshang Bank due to the serious credit risks it poses, in a rare takeover of a domestic lender. Regional banks' shares fell and their funding costs rose on Monday.
Shares of software developers gained after vice minister for Industry and Information Technology Wang Zhijun reiterated the government's supportive stance for tech firms amid rising protectionism from the US. Wang said the government would play a greater role in formulating strategy and increase subsidies for research and development, and offer better protection of their intellectual property. Yunnan Nantian Electronics (000948 CH) shot up 10% to 11.18 yuan; Hi-Target Navigation Tech (300177 CH) was up 10% at 14.7 yuan; China National Software & Service (600536 CH) jumped 10% to 64.11 yuan. Meanwhile, Hithink RoyalFlush Information Network (300033 CH) soared 9.07% to 90.29 yuan.
Shares of automobile companies were pressured, after reports that growth in automobile sales this year will lately remain flat from a year ago, at around 28.1 million units, citing a report jointly released by the China Association of Automobile Manufacturers. Yangzhou Yaxing Motor Coach, Chongqing Changan Automobile, and Anhui Jianghuai Automobile were lower in range of 4% to 5%.
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CURRENCY NEWS: China's yuan was higher against the U.S. dollar on Monday, helped by the central bank's firmer mid-point fixing. Prior to market opening on Monday, the People's Bank of China set the midpoint rate at 6.8924 per dollar, 69 bps or 0.1% firmer than the previous fix of 6.8993. At around afternoon, the onshore spot yuan was changing hands at 6.8930, after touching a high of 6.8854 at one point, the strongest since May 16.
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