Tuesday, August 11, 2015

China is no longer El Dorado for multinational

The Shanghai stock market and weak domestic consumption forced transnational vision. Still, it's difficult to get out of the Chinese market, "there is no other comparable economy."

The Chinese market is essential, but no longer the golden era for foreign companies. Many multinationals are revising downwards its sales forecast, which shows the slowdown in consumption and the growth of the second world economy.

In a time when the United States and Europe are in full season results, the cooling in China is a recurring theme for companies.

The effect is most marked in the automotive sector, which suffered a 2.3% drop in June in China, adding a meager growth of 1.4% in the first half.

"In the case of increasing challenges in the Chinese market, can not exclude that has effects on our forecasts," said BMW Chief Financial Officer Friedrich Eichiner.

"Competition is intensifying," said for his part the chief operating officer of the Japanese Nissan to China, Jun Seki.

It is well embedded in the Chinese market, which had traditionally been an asset to the company, now regarded by investors as a synonym of being exposed to risk.

Moreover, the recent debacle of the Shanghai Stock Exchange, despite the strong state intervention in the markets reinforced the impression of a fragile activity, although there is a consensus that the consequences for the real economy appear to be limited.

Disappointment in the construction sector

In the US, the UTC industrial group, which makes Otis elevators and air conditioning systems, cut its forecasts for 2015 downwards by justifying the "stronger than expected" slowdown in China.

Like other steelmakers and mining groups, the conglomerate lowered its forecast after disappointing data from the Chinese market, a key niche that sets the pace and suffered the consequences of several years of overheating, with several stalled projects, due to over-indebtedness promoters.

These alarmist publications do not seem to be in line with the stabilization that has registered the growth of the Chinese economy in the second quarter grew 7%, according to government data, playing the same level in a quarter and reaches well the targets set by Beijing.

"The reality is, almost certainly, far worse than the official figures of GDP", as several other indicators "suggest a sharp slowdown," said Mark Williams meanwhile, cabinet Capital Economics.

The PMI, calculated by the independent firm Markit index is at the lowest level in two years, marking a sharp contraction in manufacturing activity in July, which accumulates and its fifth consecutive year low.

"A third of global growth is coming from China, but their relationship with the rest of the world has changed considerably" with a sharp slowdown in the sectors of construction and heavy industry, which are the traditions of the expansion of pillars economy, Williams notes.

Local competition

At a time when retail sales continue to grow in China (up 10.6% in June), and Beijing has expressed his hope that domestic consumption is the engine of his new economic model, foreign brands barely clawing benefits, the powerful boom that have registered their local rivals.

Although the US company Apple recorded an increase in sales of iPhones in the quarter ended in late June, China was relegated to third place.

The brand was overtaken by local manufacturers Xiaomi and Huawei, while the South Korean company Samsung was relegated to fourth place.

"The competitiveness of Chinese firms in the industrial level has unquestionably improved, which complicates the situation for foreigners," says Li Daxiao, Yingda Securities analyst operator.

The rising cost of labor in China and the multiplication of the investigations against the multinationals continue to cast a gloomy picture.

However, it is difficult to get out of the Chinese market, which although slowing, is unique for its growth and especially by its volume. "You can not find another comparable economy," says Li.

No comments:

Post a Comment