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BUSINESSMonday 21 September 2015
China’s shifting economy mints US corporate winners, losers
TOM MURPHY ple need to keep eating, States, where economic ing “tremendous” demand population already has a
walking, powering their growth is solid. for international flights, and house,” he said. “They’ve
PAUL WISEMAN homes.” Haft, for example, runs a they also expect a surge in got a lot of very under-uti-
Chinese consumers now company that exports U.S. demand for cargo-carry- lized real estate.”
AP Business Writers have more discretionary cattle hides to China. Busi- ing aircraft. Market-wide demand for
income to spend on enter- ness is booming, he says, At General Motors, which medium- and heavy-duty
China is losing its appetite trucks in China plunged 30
percent in the first half of
for dump trucks, iron ore the year. That’s not good
for a company like diesel
and construction cranes. engine maker Cummins
Inc., which draws between
But the Chinese still want to 10 percent and 15 percent
of its revenue from China.
travel and give their kids a But the company’s results
show that picking winners
better education. and losers of China’s shift
isn’t as simple as identifying
Growth in the world’s sec- broad industries that are
experiencing either growth
ond-largest economy is or slowing demand. Cum-
mins’ second-quarter sales
decelerating and rattling in China advanced 6 per-
cent to $916 million, thanks
financial markets around in part to a government
push for tighter emissions
the world. Behind that standards. Those stan-
dards are fueling demand
slowdown is an evolution- for new engines and parts
that help older ones cut
ary shift in China’s econo- pollutants.
China’s slowdown is ex-
my— from a dependence pected to contribute to
a year-over-year decline
on exports and investment in the total revenue for
roughly 60 chip companies
in factories and housing in the current quarter end-
ing in September, predict-
— to a reliance on spend- ed B Riley analyst Craig El-
lis. It would be the first quar-
ing by its emerging middle terly drop in three years.
But these companies are
class. also somewhat insulated
because they supply Chi-
That transition, a gradual nese factories run by con-
tractors hired by Apple
and perhaps painful one, and other device makers.
Those factory orders are
will affect which U.S. com- more heavily influenced
by consumer demand for
panies stand to benefit and finished smartphones, tab-
lets and other products in
which will be squeezed as the United States, Europe,
Japan and other markets.
China’s growth slides from “No chip company is going
to be completely immune”
the double-digit annual An employee works in a textile factory in Huaibei in central China’s Anhui province. The world’s to China’s slowdown, Ellis
said. “But it’s also impor-
rates of the mid-2000s to 7 second largest economy is decelerating, and the prospect of its slowing growth is rattling tant to distinguish where
the hardware is being
percent, 6 percent, maybe financial markets around the world. But China also is shifting _ from a dependence on exports built and where it’s being
consumed.”q
even less. and investment in factories, infrastructure and housing to a reliance on consumer spending from
The shift is likely to pinch the country’s emerging middle class. (Chinatopix Via AP)
American manufactur- tainment, education and because the Chinese turn sells more vehicles in China
travel after years of robust the hides into wallets and than any of its U.S.-based
ers that prospered during economic growth. That ship them back to the competitors, sales in July
additional income has United States, where the slipped 4 percent com-
China’s investment boom created a bright outlook economy and consumer pared with a year ago.
for companies that serve demand are comparative- But the company’s first-half
— makers of heavy con- them. ly healthy. sales in China rose 4.4 per-
The Princeton Review, a Recent trade numbers cent to a record 1.7 million
struction equipment and Natick, Massachusetts, highlight the changes: vehicles, and the carmak-
company that helps stu- U.S. merchandise exports er still forecasts single-digit
industrial machinery, for in- dents prepare for stan- to China rose just 0.2 per- growth for the rest of the
dardized tests and college cent in the second quarter year. So far, the shift is hurt-
stance. entrance exams, remains to $30.5 billion from a year ing companies that have
bullish on China. The com- earlier. By contrast, servic- benefited from China’s
But the service sector — a pany declines to provide es exports, which include building boom. Construc-
specific sales numbers. But tourism and banking, tion equipment giant Cat-
broad category that in- the number of Chinese stu- surged nearly 14 percent erpillar, for instance, said
dents enrolling in U.S. col- to $11.97 billion. its Asia-Pacific region sales
cludes things like restau- leges is growing by double Boeing Co., the biggest dropped 21 percent in the
digits every year. provider of commercial second quarter — a casu-
rant meals, haircuts and “We do not see any slow- jets in China, forecasts de- alty of a slowing China.
down in the future,” said mand for 6,330 new jet- China is facing a construc-
hotel stays — remains “rea- Steven Chou, international liners in that country by tion glut, which is leading
vice president at Princeton 2034, with a value of $950 to a deceleration in prop-
sonably robust” and has Review. billion. Most of those new erty investment that will
Also doing well are Ameri- planes will handle passen- likely bottom over the next
been a dominant driver of can companies that make ger growth. Company ex- few quarters, Lardy, the
things in China and export ecutives said in a recent economist, said.
China’s growth since the them back to the United podcast that they’re see- “Ninety percent of the
first half of 2012, said econ-
omist Nicholas Lardy, a se-
nior fellow at the Peterson
Institute for International
Economics.
“Yes, China is slowing,”
said Jeremy Haft, an en-
trepreneur, consultant
and author of the forth-
coming book “Unmade
in China: The Hidden Truth
about China’s Economic
Miracle.” ‘’But households
have huge (savings). Peo-
