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
免責聲明: XM Group提供線上交易平台的登入和執行服務，允許個人查看和/或使用網站所提供的內容，但不進行任何更改或擴展其服務和訪問權限，並受以下條款與條例約束：（i）條款與條例；（ii）風險提示；（iii）完全免責聲明。網站內部所提供的所有資訊，僅限於一般資訊用途。請注意，我們所有的線上交易平台內容並不構成，也不被視為進入金融市場交易的邀約或邀請 。金融市場交易會對您的投資帶來重大風險。
所有缐上交易平台所發佈的資料，僅適用於教育/資訊類用途，不包含也不應被視爲適用於金融、投資稅或交易相關諮詢和建議，或是交易價格紀錄，或是任何金融商品或非應邀途徑的金融相關優惠的交易邀約或邀請。
本網站的所有XM和第三方所提供的内容，包括意見、新聞、研究、分析、價格其他資訊和第三方網站鏈接，皆爲‘按原狀’，並作爲一般市場評論所提供，而非投資建議。請理解和接受，所有被歸類為投資研究範圍的相關内容，並非爲了促進投資研究獨立性，而根據法律要求所編寫，而是被視爲符合營銷傳播相關法律與法規所編寫的内容。請確保您已詳讀並完全理解我們的非獨立投資研究提示和風險提示資訊，相關詳情請點擊 這裡查看。
