Chinese equity markets have taken a knock in recent weeks, with the benchmark Shanghai composite wallowing in bear market territory since last week.
There was a level of calm on Asian markets after Trump's tariffs began on Chinese products. The United States tariffs on Chinese exports began from Friday, 06 July 2018. The Trump administration has levied a 25% tariff on $34 billion in Chinese goods, while the Chinese government has retaliated by announcing tariffs on the same value of U.S. goods. China's Ministry of Commerce informed markets on Thursday that China's retaliatory tariffs on US goods will take effect immediately after US tariffs on Chinese imports kick in. Ministry of Commerce spokesman Gao Feng made the remarks at a press conference when asked if China will slap new tariffs on some U.S. goods after the U.S. implements tariffs on Chinese imports worth US$34 billion Friday. He said about 59 percent of the US$34 billion imports subject to U.S. tariffs are produced by foreign-invested enterprises in China.
The trade spat between the world's two largest economies has been in the spotlight for about three months, since U.S. President Donald Trump signed a presidential memorandum in March threatening tariffs on Chinese imports.
Trump administration initially threatened to hit China with 25% tariffs on a list of goods worth $50 billion annually, over what Washington says is the rampant theft of US technical know-how. But the list was pared down to 818 product categories worth more than $32 billion after US companies requested exemptions for key imports. A second tranche of 284 goods valued at $16 billion -- which would bring the total to $50 billion -- will be targeted after they undergo an additional process of review and public comment, which could lead to a lower total. The tariffs hit a broad spectrum of Chinese goods -- like passenger vehicles, radio transmitters, aircraft parts and computer hard drives -- from industries the Trump administration says have benefited from unfair trade practices.
Beijing is hit back with tariffs initially on nearly $30 billion in US goods, also taking effect Friday, including vehicles and many agricultural and food products, such as soybeans, which will hit US farmers hard. The remaining $15 billion would be imposed in the second phase would target crude oil, propane and chemicals. Added to the tariffs are the increased scrutiny on Chinese investments in the United States, which the government says are sensitive for economic or national security reasons, which already has reduced incoming investment.
Shares of consumer and pharmaceutical companies gained as traders began to load up on stocks they believe were least exposed to overseas sales. Agricultural producers also gained on expectations that Beijing will levy retaliatory tariffs on US goods from soybean to pork. Inner Mongolia Yili Industrial Group, China's biggest dairy maker, added 4.4 per cent to 27.47 yuan and Jiangsu Yanghe Brewery Joint-Stock rose 1.6 per cent to 128.36 yuan. Chongqing Zhifei Biological Products gained 3.4 per cent to 46.00 yuan.
Heilongjiang Agriculture led the gain among farming stocks, surging 6.7 per cent to 10.17 yuan. Zhongnongfa Seed Industry Group jumped 5.7 per cent to 3.33 yuan.
CURRENCY NEWS: The Chinese yuan was down against the dollar on Friday, after the People's Bank of China fixed softer mid-point rate. The central parity rate of the Chinese currency renminbi, or the yuan, weakened 156 basis points to 6.6336 against the U.S. dollar Friday, according to the China Foreign Exchange Trade System.
The Chinese currency has been volatile in the run-up to the U.S. levying tariffs on Chinese goods. It had its worst month on record in June, losing about 3.3 percent of its value against the greenback, and the slide continued into July. At the start of the week, the yuan, which is closely managed by the Chinese authorities, fell as far as 6.72 per dollar.
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