Companies like Caterpillar, 3M, United Technologies and ABB are among manufactures that have reported a decreased performance in China's last quarter. China's economic growth has slowed to its three year low. Investors are nervous but a lot of chief executives think the economy will grow again when the government eases the monetary policy and inland expansion. The Chinese government has responded that the struggling housing market has influenced consumer and industrial demand. Official forecasts for 2012 are an eight year low growth rate of 7.5%. The slowdown has also been attributed to the weaker demand from companies that rely on exports to Europe due to the debt crisis occurring on the continent. However some companies like Apple have increased their sales due to their iPhones. Even if China's growth picks back up, it is not expected to be at the rate it was the past decade especially in sectors like the automobile industry.
3 comments:
This is interesting. I wonder how much the impact of China not being the leader in cheap labor any more has to do with the economic slow down. Firms are recently choosing places like Vietnam to house their manufacturing needs instead of China because China is becoming more expensive to do business in.
I agree with Samuel that firms are switching their manufacturing plants to countries with cheaper labor like India, Vietnam and Bangladesh. However they can still draw demand from the emerging middle class in China and India to fill the demand loss from Europe.
I think the Chinese economy is in trouble. Although the GDP growth rate of last year was a remarkable 7.5%, a lower-than-eight GDP growth rate for China can be considered a recession. The problem for Chinese economy is that there is no real point for growth in the economy. The GDP growth fueled merely by infrastructure programs and real estate projects is not sustainable.
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