China's stuttering recovery darkens global corporate growth outlook
By Medha Singh
Aug 2 (Reuters) -Global burger chains to car manufacturers are increasingly feeling the pinch from a faltering recovery in the world's No. 2 economy, China, and are strapping in for a bumpy ride ahead.
A protracted downturn in the property market and high levels of job insecurity have knocked the wind out of a fragile recovery in China, a global trading powerhouse, and the effects of its slowdown can be felt across borders.
Coffee chain Starbucks SBUX.O, carmaker General Motors GM.N and technology firms hurt by curbs on exports to China are among those that have sounded the alarm on weakness in the nation. The Chinese government's stimulus measures have so far failed to boost consumption, and the overleveraged property market has made consumers less likely to spend.
"It's a difficult market right now. And frankly, it's unsustainable, because the amount of companies losing money there cannot continue indefinitely," General Motors CEO Mary Barra said last week as the automaker's division in China shifted from being a profit engine to a drain on its finances.
China's $18.6 trillion economy grew more slowly than expected in the second quarter, and cautious households are building up savings and paying off debts. Retail sales growth sank to an 18-month low in June, and businesses cut prices on everything from cars to food to clothes.
In a bid to stem the rot, China outlined stimulus directed at consumers last month to support equipment upgrades and consumer goods trade-ins, but that has not allayed concerns.
Some analysts have warned that barring a structural shift that gives consumers a greater role in the economy, the current path fuels risks of a prolonged period of near-stagnation and persistent deflation threats.
"There is a deep concern that Beijing is not introducing the kind of stimulus that helps broaden the economic base," said Quincy Krosby, chief global strategist for LPL Financial.
"It's becoming more difficult for U.S. companies to look to the Chinese market as a reliable partner."
China remained a drag on Apple AAPL.O last quarter. The iPhone maker's sales declined a much steeper-than-expected 6.5% in the country, which accounts for a fifth of its total revenue.
French cosmetics giant L'Oreal OREP.PA said the Chinese beauty market will remain slightly negative into the second half of 2024 with no visible improvement in sentiment.
Other consumer companies' sales have been hurt as well, including Starbucks SBUX.O, McDonald's MCD.N and Procter & Gamble PG.N, while soft domestic travel demand prompted a revenue warning from Marriott MAR.O.
The sluggish growth was also evident in underwhelming results from luxury goods makers LVMH LVMH.PA and Gucci-owner Kering PRTP.PA and profit warnings from Burberry BRBY.L and Hugo Boss BOSSn.DE.
"The world was surprised at how weak China was economically as this year unfolded," said Marc Casper, CEO of medical equipment maker Thermo Fisher TMO.N.
Meanwhile, foreign automakers from Tesla TSLA.O to BMW BMWG.DE, Audi and Mercedes MBGn.DE, are locked in an intense price war in China after ceding market share to domestic EV makers, led by BYD 002594.SZ, who offer high-tech, low-cost models.
To be sure, the MSCI World with China Exposure Index .dMIWOC000eNUS, which tracks 52 companies with high revenue exposure to China, is up 11.6% this year, not far off a 12% rise in MSCI's broad gauge of global stocks .MIWD00000PUS.
However, most of the China-focused index's performance is thanks to a surge in semiconductor stocks, including Broadcom AVGO.O and Qualcomm QCOM.O, which have benefited from AI-driven demand.
POLICY CHALLENGES
Mounting Sino-U.S. trade tensions and certain domestic policies have added to multinational companies' woes.
Beijing's anti-corruption campaign that began last year has caused disruptions that partly prompted GE HealthCare GEHC.O to lower its revenue growth forecast and sparked concerns over sales of Merck's MRK.N Gardasil vaccine.
Meanwhile, tighter U.S. export curbs on sharing high-end chip technology with China are impeding chipmakers from serving one of the largest markets for semiconductors.
Qualcomm said it took a revenue hit from the U.S. curbs on exports to China, overshadowing its otherwise upbeat forecast on Wednesday.
Analysts said the pressures are unlikely to ease soon.
"It has been a surprise that (the slowdown) has lasted so long," said Stuart Cole, chief macroeconomist at Equiti Capital.
"Once the Covid restrictions were lifted the general expectation was that China would bounce back. But the Chinese pace of expansion we saw previously will not be seen any time soon."
China's consumer confidence remains low https://reut.rs/3WLgfo5
Companies with significant revenue exposure to China https://reut.rs/3ypLmMJ
Reporting by Medha Singh and Leroy Leo in Bengaluru; additional reporting by Aditya Soni, Juveria Tabassum, Manya Saini, Bhanvi Satija, Seher Dareen, Aby Jose and Yadarisa Shabong; Editing by Arpan Varghese and Anil D'Silva
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.
