HK Movers | Chinese Telecom Operators Fall as VAT Rate on Services Is Raised

Chinese telecom operators dropped in Hong Kong. China Unicom fell 10%; China Telecom fell 8%; China Mobile fell 4%.

China has recently announced that, effective January 1, 2026, certain telecommunications services will be reclassified for tax purposes. Services delivered via fixed-line networks, mobile networks, satellites, and the internet—including mobile data services, SMS and MMS services, and broadband internet access—will be moved from the category of value-added telecommunications services to basic telecommunications services. As a result, the applicable value-added tax (VAT) rate will increase from 6% to 9%.

On February 1, China Mobile, China Unicom, and China Telecom each issued statements confirming that the adjustment to the scope of VAT classification for telecommunications services, and the corresponding increase in the VAT rate from 6% to 9%, will have an impact on their revenues and profits.

Industry analysts note that the change represents a “reclassification” rather than the introduction of a new tax burden. The adjustment reflects a more accurate alignment of tax policy with the fundamental nature of telecommunications services. By restoring these services to the basic telecommunications category, the policy further underscores their public utility characteristics.

Analysts believe the move is likely to encourage telecom operators to place greater emphasis on core activities such as network investment and service reliability, while reducing homogeneous marketing competition. Over time, this is expected to improve overall industry efficiency and support the high-quality development of digital infrastructure underpinning China’s digital economy.