Chi­nese dragon los­ing its shine for for­eign firms

The Pak Banker - - INTERNATIONAL BUSINESS/SPORTS -

The once ir­re­sistible al­lure of the Chi­nese mar­ket to for­eign multi­na­tion­als is los­ing some of its lus­tre as slow­ing growth in the world s sec­ond-largest econ­omy hits their sales.

The latest fig­ures from firms re­port­ing dur­ing the cur­rent re­sults sea­son in Europe, the United States and Ja­pan paint a pic­ture of over­seas firms fac­ing a wors­en­ing of op­er­at­ing con­di­tions in China.

Volk­swa­gen, which has in­vested heav­ily in China and has just dis­placed Toy­ota as the world s lead­ing car man­u­fac­turer, saw sales in the coun­try -- which it de­scribes as its "sec­ond home mar­ket" - - fall 3.9 per­cent in the first half, its first drop in a decade.

"We are keep­ing a very close watch on global macroe­co­nomic trends," chief ex­ec­u­tive Martin Win­terkorn said in a state­ment, "es­pe­cially where there are un­cer­tain­ties such as in the Chi­nese, Brazil­ian and Rus­sian mar­kets".

The ap­peal of nearly 1.4 bil­lion con­sumers and an econ­omy regularly grow­ing in dou­ble dig­its has brought more than $1.5 tril­lion of for­eign in­vest­ment to China over the last three decades. But the eco­nomic ex­pan­sion is slow­ing -- gross do­mes­tic prod­uct grew 7.0 per­cent yearon-year in April-June, match­ing the worst quar­terly re­sult since the first three months of 2009 dur­ing the global fi­nan- cial cri­sis. Some in­vestors have long seen China as a high risk des­ti­na­tion.

Ris­ing costs for labour and more com­pet­i­tive mar­kets as do­mes­tic brands gain stature have trou­bled for­eign com­pa­nies in re­cent years, as well as a se­ries of anti-mo­nop­oly probes which ap­peared to tar­get over­seas firms.

"The in­dus­trial com­pet­i­tive­ness of Chi­nese en­ter­prises has im­proved, mak­ing it harder for for­eign com­pa­nies to com­pete," Li Dax­iao, an an­a­lyst at Yingda Se­cu­ri­ties, told AFP. Such chal­lenges have been com­pounded by the coun­try s slow­ing econ­omy.

Ja­pan s sec­ond-big­gest steel­maker JFE Hold­ings low­ered its an­nual profit forecast in late July be­cause of "the eco­nomic slow­down in China and the over­pro­duc­tion of steel" in the coun­try, the world s largest con­sumer of the me­tal.

In the United States, in­dus­trial gi­ant UTC, the maker of Otis lifts, re­vised down its earn­ings forecast for 2015 partly on the back of what it de­scribed as "a slow­ing China".

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