8/18/2023

ttps://www.msn.com/en-us/money/companies/xi-s-china-has-become-too-risky-for-foreign-businesses/ar-AA1fs0i6?ocid=msedgdhp&pc=U531&cvid=f3833051920d41a795f9fd7405ca9d87&ei=13

Xi’s China has become too risky for foreign businesses (msn.com)

A bitter joke going the rounds of the world for the past several weeks – business executives describing themselves, to one another and to friends, as “mushrooms.”
They are mushrooms, they explain, because — “we are kept constantly in the dark and are fed nothing but manure.”

8/14/2023

Wonder if the corporate folks wish they were BACK IN THE U.S.

I try not to buy anything made in China due to everything is glued/plastic and doesn’t last. Do they not have cobblers – shoemakers – who make shoes and sew on the soles. Everything they make doesn’t last or fit. Sizes are made for little people’s feet and most shoes are rounded at the front and flat on the bottom – no support. An example – popular dressmaker skirt/slacks hem fell out when it was dry cleaned. Bought a beautiful colorful blouse that was washable cotton/polyester and when washed it was in two pieces – front and back. Not good.

Me – I like American-made goods.

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Fox

China’s economy is probably worse than being reported: Gordon Chang

‘The Coming Collapse of China’ author Gordon Chang breaks down China’s finances on ‘Making Money.’

The Wall Street JournalFollow

China’s Worsening Economy Is Hurting Corporate America

Story by Dan Strumpf •16h

China’s Worsening Economy Is Hurting Corporate America© Aly Song/REUTERS

China’s Worsening Economy Is Hurting Corporate America

Story by Dan Strumpf •16h

China’s Worsening Economy Is Hurting Corporate America© Aly Song/REUTERS

HONG KONG—China’s deepening economic slump is damaging the fortunes of big American companies deeply rooted there, with some growing increasingly pessimistic that the country’s long-awaited postpandemic boom will materialize. 

Companies embedded in China’s ailing manufacturing, construction and export industries are reporting weaker sales. In some cases, they are warning of further trouble to come as growth grinds to a near halt and economic readings are dour.

The slowdown is registering in earnings results across a range of companies, from chemical giants DuPont and Dow to heavy-equipment suppliers such as Caterpillar. Some companies expressed disappointment with Beijing’s stimulus measures and cut their sales outlook for the country into this year. 

“China orders were down 20% in the first quarter, 40% in the second quarter, but really, 50% in June,” said Rainer Blair, chief executive officer at Washington, D.C.-based Danaher, describing a downturn in sales of the company’s bioprocessing equipment. “Frankly, we don’t see that getting better here in the second half.”

Blair cited falling foreign investment and excess capacity postpandemic for the slack off in demand. Overall China sales for Danaher, which derived about 13% of its $31.5 billion revenue from the country last year, fell 10% in the second quarter, he said.

Some executives warned of a global knock-on effect as customers in other geographies also feel the pain from reduced demand in China, resulting in a cutback in orders and lower revenue in other parts of the world.

The pain isn’t being felt evenly. Companies tied to recovering sectors, such as domestic tourism, posted improving results. Hotel chain Marriott reported a surge in demand for its rooms in China amid a rebound in domestic travel, adding that it was generating more revenue per room now than in 2019.

Starbucks said on Aug. 2 that China revenue grew 51% in its most recent quarter compared with a year earlier, after logging a 3% increase in the prior quarter. Apple reported record revenue for its region that includes mainland China, Hong Kong and Taiwan.

China’s economic reopening after it abruptly ended zero-Covid restrictions in December fueled executives’ hopes for a rebound that would be felt globally. After a brief economic bounce, however, readings of the world’s second-largest economy have soured.

Manufacturing activity has contracted, exports have declined, consumer confidence remains fragile and youth unemployment has risen to record highs. More worrying for some companies, recent data showing an unusual drop in consumer prices have raised concerns that the country could be entering a deflationary spiral of progressively weakening demand.

Related video: China Issues Plan to Further Attract Foreign Investment (Bloomberg

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Bloomberg

China Issues Plan to Further Attract Foreign Investment

“The anticipated economic rebound following the end of zero-Covid restrictions has yet to fully materialize,” Howard Ungerleider, chief financial officer at chemical company Dow, said last month. The company blamed a decline in second-quarter income on a slow recovery in China leading to reduced prices for its products. 

Meanwhile, rival DuPont earlier this month said sales from existing operations in China fell 14% in the second quarter compared with a year earlier, mainly because of frail demand for consumer electronics. 

Those headwinds contributed to its decision to cut its overall growth outlook for the second half of the year, the company told investors. DuPont CEO Edward Breen said the company expects growth there to pick up eventually, but it will be later than expected. 

“It’s really a slowness in the industrial economy in China right now,” he said. The Wall Street Journal reported on Saturday the company’s sale of its sustainable-materials business last year to a Chinese company has prompted an investigation by the FBI. 

At Caterpillar, company executives earlier this year forecast lower-than-usual sales out of China, which typically accounts for between 5% and 10% of revenue. That outlook has recently worsened further still, owing to a downturn in sales of the company’s heavy excavation equipment, which makes up the bulk of its China-based business, CEO James Umpleby said Aug. 1.

“We now expect further weakness” from China, he said.

China’s broader economic malaise has come despite efforts by Beijing policy makers to juice the economy, including through a series of interest-rate cuts designed to spur lending. Economists widely see the efforts to date as meager, and some company executives expressed disappointment that the stimulus efforts to date haven’t borne more fruit. 

The Wall Street Journal has reported that officials are planning further measures, including the possibility of billions of dollars in new infrastructure spending and efforts to shore up the country’s weak property market.

“Markets are not reflecting much benefit from the initial stimulus measures,” LyondellBasell Industries CEO Peter Vanacker said of the chemical maker’s performance in China in the second quarter. The company reported a 22% drop in revenue during that quarter in China, the company’s third-biggest market after the U.S. and Germany.

”All the stimulus we read about really hasn’t trickled down to any significant economic activity,” echoed Lee Banks, vice chairman at industrial-components supplier Parker Hannifin.

That company, based in Cleveland, said that while it was disappointed in the pace of the China recovery, some of its weakest overseas markets of late were elsewhere: Germany, Austria and Switzerland. A big reason, Banks said, is that customers in those countries export products onward to China.

“The China export market is a big deal for them, and China has not rebounded like we all expected it would,” Banks said.

Chandler, Ariz.-based Microchip Technology reported a similar dynamic earlier this month, with CEO Ganesh Moorthy noting “early signs of an impending slowdown in Europe, exacerbated by some of our European customers being dependent on exports to countries like China.”

“Going through the month of July, we have not yet seen China recover,” Moorthy said, describing the company’s business there as “much weaker than our expectations.”

Write to Dan Strumpf at Dan.Strumpf@wsj.com

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kommonsentsjane

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