Chinese Slowdown Hits U.S. Companies
August 30 2016 - 12:10PM
Dow Jones News
American companies are feeling the slowdown in China.
A new survey from the US-China Business Council, a nonprofit
group whose members do business with China, finds that 17% of firms
expect falling revenues in their China operations this year.
One-fifth say they plan to cut staffing resources for their Chinese
operations.
The world's second-largest economy has had a rocky year, and
sudden drops in the value of China's currency have roiled global
markets. The Chinese government has ramped up stimulus efforts, but
worries about growth and the value of the yuan remain.
As a result, U.S.-based companies' previously rosy outlook on
the country seems to be softening. The council's survey of 119
firms found that nearly three-quarters have an optimistic or
somewhat optimistic take on the coming five years, the lowest share
recorded in the past decade. Firms say they are concerned about the
political and regulatory environment, decelerating domestic market
growth and rising competition and costs.
More than a third—35%—of companies said the profitability of
their Chinese business is down year over year. In 2015, 30% of
companies said their profitability had dropped; the year prior it
was 27%.
Among firms that have recently changed plans in China, Wal-Mart
Stores Inc. opted to strike a deal for a partnership with one of
the country's largest e-commerce firms, deciding against pursuing
the market on its own. Ford Motor Co. has also been facing pressure
from domestic rivals there.
The council's survey, conducted in May and June, showed some
bright spots. Just 10% of companies said they were pessimistic
about China, and two-thirds said they expect continued revenue
growth in their China business. And 90% of firms polled said their
operations in the country are profitable, up from 85% who reported
profitability in 2015.
Some 15% of companies said they were actively cutting back or
halting investment in China, citing increasing restrictions and
better prospects elsewhere.
Write to Rachel Feintzeig at rachel.feintzeig@wsj.com
(END) Dow Jones Newswires
August 30, 2016 11:55 ET (15:55 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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