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Western companies have warned that China’s gloomy business outlook could have global repercussions as the world’s second-largest economy struggles to recover from a strict coronavirus-era lockdown.
Corporate reports from various companies around the world have documented their concerns about China. For decades, China has provided a thriving market for everything from chemicals to cars, healthcare and travel.
“Demand in China is sluggish,” lamented Joel Smejkal, chief executive of U.S. semiconductor maker Vishay Intertechnology.
José Ferreira Neves, chief executive of British e-commerce fashion group Farfetch, agrees: “The recovery is not as explosive as everyone thinks.”
Agilent Chief Executive Officer Mike McMullen said the “prime driver” of the revenue decline in the latest quarter was the California lab instrument maker’s business in China, prompting the company to lower its annual growth target.
Data last month showed China’s economy lost momentum in the second quarter of the year, with falling exports, weak retail sales and a sluggish real estate sector weighing on growth.
Gross domestic product expanded 0.8% in the three months to June, down from 2.2% in the first three months of the year. Difficulties facing the world’s second-largest economy are weighing on global growth.
To stimulate the economy, Chinese authorities announced a series of reforms to financial markets earlier this month and lowered interest rates less than expected. Spending failed to pick up last month, exports fell and consumer prices fell.
Qi Wang, chief investment officer at MegaTrust Investment, which focuses on domestic stocks in China, said he could not recall consumer, property and business confidence ever being this depressed. “It’s not just a simple cyclical problem. It looks like something mundane and structural.”
“The Chinese are not so happy and confident about their government,” commented Martin Brudermuller, boss of chemicals group BASF, one of China’s largest foreign investors. “They spend a lot of money on their kids’ education. They have 20 per cent youth unemployment right now. They’re losing a lot of money on real estate. They’re just being careful with how they spend their money.”
He added: “The fundamentals won’t change over the next few decades, but . . .[the recovery]There was no kick in the second half. “
Maike Schuh, chief financial officer of another German chemicals group, Evonik, called China’s recovery “very slow”, noting that the construction industry was “still in crisis” and that “jobs, especially among young people , seems to be a real problem”.
Markus Steilemann, chief executive of rival Covestro, reported a drop in profits of almost a third last year and warned that a “rapid recovery in China in the second half” was a “snapshot”. Unpredictable”.
Travel company Booking Holdings said this month that Chinese outbound tourists are declining. “China still doesn’t have mass production,” said CEO Glenn Fogel. “I don’t expect China to recover for some time, [a] Could be a big time. “
There were exceptions for consumer-facing companies including Apple, whose chief executive Tim Cook spoke of an “acceleration” in the Chinese market as the company turned a 3% sales decline in the second quarter to An 8% increase for the third quarter.
Starbucks, which counts China as its second-biggest market, said the weak recovery had “no noticeable impact” on its sales, while Walmart reported a 22% increase in sales in China last quarter, Ralph Ralph Lauren said its sales in China have grown by more than half since last year when Shanghai was locked down.
“Going forward, we continue to expect China to remain one of our fastest growing markets,” said Ralph Lauren CEO Patrice Louvet.
Netherlands-based insurance group Global Insurance Group said it had seen more capital outflows from its asset management joint ventures in China, where its chief executive called the country’s “quite unstable economy”. But after the lockdown was lifted, its life insurance sales in the country through separate business partners rose by 80%.
German industrial group Siemens said new orders from China had fallen sharply, especially in the factory automation business. But CEO Roland Busch said, “In the long run, we can say that China is definitely one of the main markets and will generate profits”.
Jakob Stausholm, chief executive of mining group Rio Tinto, said the group remained “cautiously optimistic” about the Chinese economy. “They have proven time and time again that they can stimulate the economy and manage the economy effectively if there are setbacks.”
But others admit they simply don’t know: “It’s hard to judge the timing and extent of these shifts,” said Nicholas Anderson, chief executive of British engineering group Spirax-Sarco. “As far as China is concerned, my crystal ball is very cloudy — [there is] There is a lot of fog around. “
Additional reporting by George Steele, Ian Smith and Euan Healy in London
