As time goes by, foreign companies are learning that they can no longer count on China for earnings growth. As companies report first-quarter results, big-equipment makers like Caterpillar Inc. and ABB Ltd. see slowing demand, while consumer-focused Apple Inc. and Starbucks Corp. surge ahead.
The mixed signals could be an early sign of big change in Chinese economic growth that emphasizes consumer spending, economists say. If sustained, the trend could lead to stable growth in the years ahead, though not at the double-digit pace that the country has averaged for the past 30 years.
Caterpillar, the Peoria, Ill., construction- and mining-equipment company, last week bragged about first-quarter growth in the U.S., which Chief Executive Doug Oberhelman said 'more than offset slowing in China and Brazil.'
Ditto for Swiss engineering company ABB. Chinese sales are having 'some difficulties,' said Chief Executive Joel Hogan, while demand is growing in North America for its power equipment.
Others reporting slowing China demand during the first quarter included miner Vale SA and United Technologies Corp., which said new Chinese orders fell 21% at its Otis Elevator unit.
Meanwhile, Apple reported that sales in greater China, which includes Hong Kong and Taiwan, more than tripled to $7.9 billion in the quarter ended March 31, driven in large part by Chinese consumers like Wang Hong. The 24-year-old saleswoman on Friday bought a new iPhone 4S from an Apple Store in Beijing for about 5,000 yuan, or nearly $800. That is about 1,000 yuan more than she makes in a month, but she said she wanted the phone to keep up with her friends -- one of the marks of an increasingly consumer-oriented society. Her friends have iPhones, 'so I think I should own one, too,' she said.
China's economy is slowing from the torrid growth rates of the past 30 years. In the first quarter, China's economy grew 8.1%, the slowest rate of growth since the first quarter of 2009. While growth in gross domestic product is expected to pick up somewhat in the rest of the year, senior government officials have warned that they aren't aiming for the growth rates of the past.
At the same time, China also appears to be in the early stages of shifting its economy so it relies more on consumer spending and less on investment, real estate and exports. Weaker sales by foreign companies reliant on the Chinese real-estate and infrastructure markets, and stronger sales by those depending on consumers, indicate that the so-called rebalancing is occurring.
Rebalancing, long urged by Western and Chinese economists, 'would give China a better shot at maintaining a reasonable rate of growth' over the long term, said Nicholas Lardy a China expert at the Peterson Institute for International Economics in Washington, D.C. That is because consumer spending is widely considered a far sturdier foundation of growth than fickle export markets or an overheated real-estate sector.
Another clue: Disposable income for China's urban households grew more rapidly than GDP in the first quarter for the first time since the global financial crisis, giving a boost to consumer spending.
Still, definitive data on rebalancing is lacking, and consumer growth would have to continue for a long period before it would become the major driver of China's economy. Steady growth in disposable income is far from assured. If Beijing mishandles policies meant to slow the property and construction sectors, the economy could crash land.
In March, new apartment prices in China's cities posted their first year-to-year decline since Beijing began cracking down on the housing market two years ago. That has depressed sales of producers of commodities that go to build apartment houses, including iron-ore company Vale of Brazil. Iron ore is the main ingredient in steel. Vale Chief Executive Murilo Ferreira said that the slowdown in China will soon come to an end.
Hongxing Mining Machinery plays a vital role in China mining industry due to her high quality mining equipment such as ore beneficiation, cone crusher, ball mill, raymond mill, etc.
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