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Chinese tech firms hit by trade war

If the upcoming results from China’s top technology, e-commerce and consumer electronic firms are anything to go by, then the trade war with the US is starting to have a significant impact.

According to analysts, tech companies in China are set to report a sharp slowdown in revenue growth for the June quarter, as both the Chinese economy and consumer spending have slowed.

China’s economic growth fell to just 6.2% in the second quarter, its weakest pace in at least 27 years.

While revenues for China’s biggest tech firms are expected to grow 26% on average in the quarter ended June 30, that will be the slowest they will have grown in six quarters

China’s e-commerce giant Alibaba, its rival JD.com, internet firm Baidu and Tencent Holdings, the gaming company, are all expected to see net income rise by just 9 percent compared to 50 percent a year ago and as a result they are expected to start cutting costs to shore up their margins.

Alibaba and Tencent, China’s biggest listed companies, have together lost roughly $96 billion in market value since the trade war took a turn for the worse in May.

The impact on the Chinese technology sector is growing, although recent reports suggest that it may well be the US that may end up suffering more in the long run.

The news that Washington is set to delay the imposition of further tariffs on Chinese goods, including hi-tech products, will certainly be welcomed by these companies and has helped to calm increasingly jittery investors.

Good news then, added to which it appears that the two respective governments seem to be talking again. Just a few weeks ago it appeared that the chances of an agreement were receding.

However, on past experience, what the next few weeks and months hold is anyone's guess.

Update: And as to prove that point the Chinese finance ministry has accused the US of violating the consensus drawn up between Donald Trump and Xi Jinping. Beijing is said to be unhappy that America announced further tariffs this month and that the US is undermining efforts to resolve the trade dispute.

China has warned that it will have to proceed with “countermeasures”.

Could the trade war be about to escalate further?

Author
Neil Tyler

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