Western com­pa­nies are back­ing away from China

The Pak Banker - - COMPANIES/BOSS -

The Chi­nese slow­down is forc­ing many Western com­pa­nies to take a hard look at their busi­nesses there, lead­ing many to re­duce in­vest­ments, costs and prod­uct lines and to tackle in­creas­ing bad debts.

Dou­ble digit growth rates dur­ing the first decade of the mil­len­nium lured scores of Western com­pa­nies to in­vest heav­ily in China. But in re­cent years growth has slowed sharply, hit­ting de­mand and rais­ing doubts about the fi­nan­cial health of Chi­nese com­pa­nies. A re­cent eq­ui­ties mar­ket rout has dashed hopes China will, in the com­ing years, re­turn to the ro­bust growth it saw in the past. "We had five fab­u­lous years in China, of course, where we grew strong dou­bledigit, and it has been grad­u­ally slow­ing down. Cur­rently, in China we had neg­a­tive or­der in­take," said Frans van Houten, chief ex­ec­u­tive of Dutch elec­tron­ics group Philips NV , on a call with an­a­lysts on Mon­day.

"Go­ing for­ward, we need to be much more mod­est on ex­pec­ta­tions with re­gard to China growth; that's just be­ing re­al­is­tic," he said. The size of China's econ­omy means ex­ec­u­tives are not talk­ing about with­draw­ing from the mar­ket but they say busi­ness can­not con­tinue as nor­mal. "I'm op­ti­mistic long-term and medi­umterm that China will come back. Short-term, we need to man­age through the drought that we see," said Ul­rich Spiesshofer, CEO of Swiss­based in­dus­trial con­glom­er­ate ABB . ABB is care­fully man­ag­ing costs and work­ing hard to con­vince cus­tomers its prod­ucts of­fer value de­spite pre­mium prices. Stu­art Row­ley, vice pres­i­dent at Ford Mo­tor Com­pany , said his com­pany had re­sponded to the soft­en­ing mar­ket by cut­ting pro­duc­tion.

Such ac­tions have knockon im­pacts on sup­pli­ers, which are also of­ten Western. French auto com­po­nents group Va­leo said slack­en­ing de­mand from Chi­nese car fac­to­ries was forc­ing it to re­view its growth plans. "We see the growth rate slow­ing down. And in the sum­mer­time, some of our cus­tomers are ex­tend­ing their sum­mer hol­i­days ... Of course, we adapt hir­ing and CapEx (cap­i­tal ex­pen­di­ture) to cur­rent mar­ket con­di­tions," said CEO Jac­ques Aschen­broich.

Newspapers in English

Newspapers from Pakistan

© PressReader. All rights reserved.