Foreign Firms Scale Down Plans as China’s Economy Weakens

China’s economy has slumped since the Covid pandemic amid a disastrous property crisis and heightened geopolitical tensions. This image shows workers walking out of a construction site in Tianjin by Country Garden, a giant developer now laden with huge debt (Reuters).
Published October 29, 2024

With Chinese citizens limiting their spending, big foreign companies are changing their strategies, as a property crisis drags on and youth unemployment stays high

 

Companies around the world are scaling back activity in China and starting to cut prices and costs, as the world’s second biggest economy continues to splutter despite efforts by Beijing to bolster consumption.

Big names such as Hermes, L’Oreal, Coca-Cola, United Airlines, Unilever and Mercedes said Chinese customers are curbing spending as a property crisis drags on and youth unemployment stays high. Some are already shifting their China strategies.

Foreign firms have been watching developments closely. French carbon graphite maker Mersen said last week it would close a factory making power transmission products in China because it cannot compete with local rivals.

International food companies such as Danone and Nestle have, meanwhile, deepened price cuts or are seeking to boost online shopping volumes.

Coca-Cola CEO James Quincey said on an October 23 earning call that the operating environment in China remained challenging. “The economy is kind of not taking off,” he told investors.

The Chinese government has cut interest rates and promised more help, but the scope and timing of further stimulus is uncertain, and investors are so far not convinced that its efforts will spur the $18.6 trillion economy.

In a worrying sign, industrial profits recorded the steepest monthly decline of the year in September, data on Sunday showed, which the National Bureau of Statistics said was due to factors such as insufficient demand.

 

 

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SOURCE: www.asia.financial.com

RELATED: Chinese economic slowdown looks even worse across some provinces

Of the 26 provinces that have reported third-quarter data, 11 experienced a steeper deceleration than the national slowdown. PHOTO: BLOOMBERG
Published October 28, 2024

CHINESE provinces that account for about a third of the economy are enduring a worse year than the nation as a whole, succumbing to a slowdown that likely swayed the government in moving ahead with a range of stimulus measures last month.

Only five mainland provinces are seeing real gross domestic product growing faster this year than the whole of last year, according to Bloomberg calculations based on official figures. Of the 26 provinces that have reported third-quarter data, 11 experienced a steeper deceleration than the national slowdown.

The worst performers so far this year are Tibet, Jilin and Hainan, whose 3.2 per cent gain is 6 percentage points lower than in 2023. Even economic powerhouses such as Zhejiang, Shanghai and Jiangsu saw GDP growth slow.

Guangdong, which made up more than 10 per cent of the economy last year, expanded just 3.4 per cent, the weakest result since the pandemic and down 1.4 percentage points from the whole of 2023. GDP nationwide expanded 4.8 per cent in the first nine months, versus 5.2 per cent last year.

The sharp downswing evident in key Chinese regions has left wide swathes of the US$18 trillion economy expanding far below the official target of around 5 per cent. In response, Beijing pivoted in late September and deployed a barrage of measures that marked President Xi Jinping’s boldest stimulus since the pandemic

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SOURCE: www.businesstimes.com.sg

 

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