China Economy: Caution and Optimism Among Global Brands as Recovery Varies

Unilever, Nissan, and Caterpillar have cautioned that China economy is recovering slowly following the outbreak, which would lower profitability.

Starbucks, LVMH, and Hugo Boss are popular restaurants and brands in China. Sales rose above 10%. Big firms are still wary of China due to economic concerns. Procter & Gamble, L’Oreal, and Coca-Cola are likewise cautious.

Last week, Unilever’s finance manager, Graeme Pitkethly, said in an earnings call for April-June that Chinese consumers are being extremely conservative with their spending, the real estate market is decreasing, and export demand is down.

China has many unemployed youth. Chinese shoppers need to be more trusting. Ireland’s Kerry Group supplies McDonald’s. After COVID-19 regulations were relaxed, they manufactured more in China.

On Wednesday, CEO Edmond Scanlon said normalcy won’t return until 2024. Beijing has attempted to boost the economy, but Tuesday’s poor manufacturing data indicated it is still struggling.

European companies that export a lot to China are already struggling with increased borrowing rates and fluctuating pricing.

China Economy Caution and Optimism Among Global Brands as Recovery Varies
China Economy Coca-Cola

Also read: Regeneron Quarterly Profit Soars: Dupixent’s Success and Future Prospects in the Pharmaceutical Business

Wilmington Trust Investment Advisors’ chief investment officer Tony Roth said China is boosting its economy. These attempts’ efficacy is unknown.

China also challenges global carmakers. Chinese automakers had half the market in 2023. Volkswagen decreased its annual sales target owing to a drop in sales in China, its largest market.

Nissan CEO Makoto Uchida remarked last week, “Sadly, our predictions for sales in China are now much lower than what we can produce.” He predicted that the world’s largest auto market would improve slowly.

China’s downturn lowers second-quarter profit projections. Refinitiv I/B/E/S data suggests US and European corporations will report their lowest profits in years.

On Tuesday, DHL Group, a considerable shipping concern, claimed that economic activity increased temporarily when China lifted its COVID-19 lockdowns. This doesn’t indicate worldwide demand.

Air and water freight dropped 15.95% and 7.1% in the first half, respectively. China’s largest commercial partners, the US, and Europe, suffered.

falling short
Samsung and SK Hynix cut NAND memory chip manufacturing because China’s reopening didn’t benefit the smartphone business.

Apple’s third-largest market, China, will report low iPhone sales on Thursday. This beats IDC’s prediction of a 2.1% increase in China’s smartphone market from April to June.

The extended real estate downturn has hurt mining and equipment manufacturers.

In our previous discussion discussing how much money we earned, we predicted that China would sell less than usual. China accounts for 5%–10% of our sales. On Tuesday, Caterpillar CEO Jim Umpleby said the market for excavators above 10 tons had dropped more than projected.

China’s vow to improve the economy has Rio Tinto, the world’s largest iron ore producer, optimistic.

Rio Tinto CEO Jacob Stausholm stated last week that based on what we’ve seen in China, the Chinese are also good at managing the economy when things aren’t going well.

Good news!
China has been eating out and buying expensive products after COVID-19 limitations were loosened. This economic benefit is rare.

Starbucks China sales rose 46%. On Tuesday’s investor call, the company’s officials stated they anticipated this and expected it to continue.

Yum China, which owns KFC and Pizza Hut in mainland China, observed more consumers. This increased second-quarter revenue by 25%. The business advised reducing per-person expenditure.

In the second quarter, LVMH, which owns 75 brands, including Louis Vuitton and Tiffany, earned 17% more than predicted. The corporation didn’t forecast the year.

Last Monday, LVMH’s money chief Jean-Jacques Guiony noted that consumers are spending less to lash back at the world than in 2021 and 2022. We can’t be seen, but we’re not pessimistic

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