Shanghai, Feb 2, 2026, 04:30 (GMT+8) — Premarket
- China Mobile announced that a VAT reclassification will push the tax rate on certain telecom services from 6% up to 9%, hitting both revenue and profit.
- On Friday, Class A shares ended at 96.38 yuan, slipping 0.6%.
- After weekend data revealed factory activity slipping back into contraction, investors are focused on signs of weakening demand in China.
China Mobile announced that changes to the VAT treatment of some telecom services will impact its revenue and profit. This has drawn attention to its Shanghai-listed Class A shares ahead of Monday’s trading session.
In a Sunday filing, the carrier disclosed that the VAT classification for services like mobile data, SMS and MMS, and broadband internet access has been updated. The VAT rate will jump to 9% from 6%, effective January 1—a 3-point increase in the headline rate.
Why this matters now: telecom operators often trade as defensive dividend stocks, yet their margins remain vulnerable to shifts in tax and policy. When mass-market services are affected, it directly impacts the largest slice of their revenue.
VAT is a consumption tax levied on sales of goods and services. When the output VAT rate rises, it can cut into profit margins—especially if companies can’t fully transfer the added cost to customers or if input tax credits fall short of making up the gap.
China Mobile’s Class A shares ended at 96.38 yuan, slipping roughly 0.6% from the previous close of 96.98 yuan, per data from Investing.com. (Investing)
The VAT alert wasn’t unique. Reports from local media show that China Unicom and China Telecom, two other major state-run telecom giants, also flagged potential hits to their revenue and profits. (The Paper)
The tax change arrives amid a softer macro environment. China’s official manufacturing PMI dropped to 49.3 in January from 50.1 in December, slipping below the 50 mark that separates growth from contraction, according to an official survey released Saturday. Nomura’s Ting Lu said, “Beijing will have to do much more in coming months” to keep 2026 growth above 4.5%. A private-sector PMI survey is expected Monday. (Reuters)
China Mobile faces a clear challenge in the short term: how much of the tax hike can it absorb, and how much will it shift to customers? With fierce price competition and close regulatory scrutiny, any change in tariffs doesn’t go unnoticed.
The company didn’t put a number on the impact in its filing. Traders will focus on upcoming earnings and any management remarks about whether efficiency improvements can balance out the bigger tax burden.
Shareholders face a potential risk. Should demand weaken and regulators push back on price hikes, operators might have to absorb more of the VAT shift, tightening margins while still investing heavily in networks and emerging areas like computing and “intelligent” services.
The real test hits at Monday’s open, as investors gauge if telecom stocks will mirror the broader mood following the soft PMI data. After that, all eyes turn to updates on the VAT adjustment and any initial hints from operators about pricing and cost strategies.
