The Covid-19 pandemic is not expected to prevent China from being the only economic power to experience positive growth in 2020. At least that is what caused the sharp rise in GDP in the third quarter. But the reliability of these data is questioned, suggesting a willingness of the Chinese authorities to take liberties with the economic reality as Beijing prepares its new five-year plan. These good results support the official rhetoric of the regime, which has repeatedly praised the resilience of the Chinese economy despite a very violent initial shock (a drop in GDP of 6.9% in the first quarter). These figures also seem to validate the policy pursued by Chinese leader Xi Jinping, who imposed draconian measures at the start of the year to contain the spread of the coronavirus in his territory. As related to US companies with Chinese operations, the article states “U.S. multinationals’ majority-owned affiliates in China brought in sales of $392.7 billion in 2018, up 4.8% from a year ago, according to the latest available data from the U.S. Bureau of Economic Analysis.” How do you think that disparity in economic recovery is going to affect multinational companies with China operations?
Monday, November 16, 2020
U.S. companies with China operations look to the Asian giant for growth
The Covid-19 pandemic is not expected to prevent China from being the only economic power to experience positive growth in 2020. At least that is what caused the sharp rise in GDP in the third quarter. But the reliability of these data is questioned, suggesting a willingness of the Chinese authorities to take liberties with the economic reality as Beijing prepares its new five-year plan. These good results support the official rhetoric of the regime, which has repeatedly praised the resilience of the Chinese economy despite a very violent initial shock (a drop in GDP of 6.9% in the first quarter). These figures also seem to validate the policy pursued by Chinese leader Xi Jinping, who imposed draconian measures at the start of the year to contain the spread of the coronavirus in his territory. As related to US companies with Chinese operations, the article states “U.S. multinationals’ majority-owned affiliates in China brought in sales of $392.7 billion in 2018, up 4.8% from a year ago, according to the latest available data from the U.S. Bureau of Economic Analysis.” How do you think that disparity in economic recovery is going to affect multinational companies with China operations?
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3 comments:
I think that companies that have operations in China may actually feel some quicker relieve from the virus because of the way it was handled. The problems for these companies would arise if they were selling products in the US and just producing them in China because there may be restrictions with getting products to the US. And even if they are able to get products to the US without any issues, they will still have to deal with the economic downturn that we are experiencing domestically. If the products are being sold outside the US and in China then I'm sure these international firms will be able to have some success there based on their current situation with the virus. Overall, it really is just dependent on how the company operates and how much they will be impacted by the virus. This can come down to where their products are sold and what kind of products they produce.
As the article mentioned: "Despite the opportunity in China, it’s been difficult for foreign businesses to bring key executives and staff back into the country due to Beijing’s stringent travel restrictions." Though China is seeing growth currently, their travel restrictions might eventually affect them in the long run even though right now they are thriving and foreign businesses are impacted. So I agree with you. We can clearly see how the pandemic has made trade and business operations somewhat difficult for all parties.
China's handling of the virus looks impressive seeing the measures they put in place. It has helped them to bounce back quickly and hard. American multinationals in China would be thankful for this seeing as they can make money now as things seemingly get back to normal. But looking back in their home country, the virus has spread havoc and for the last quarter of 2020 and the first quarter of 2021, there are projections of losses and the economy shrinking by JP Morgan Chase & co. This makes it somewhat difficult for a number of multinationals. If they can somehow make up the difference in other countries, then they are good. Otherwise, they would have to brace for fewer profits for the next two quarters.
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