Growth downturn hits global firms
Updated: 2012-10-15 02:11
By Lanlan and Shen Jingting (China Daily)
The domestic slowdown is causing concern among international firms accustomed to playing the 'China card' to boost their balance sheets but any downturn in fortunes will be sector specific, company chiefs said.
GDP growth for 2012 is estimated to be around 7.8 percent, according to Yi Gang, vice-governor of the People's Bank of China.
The official quarterly GDP data, to be released later this week, will see the economy bottoming out in the third quarter before slowly picking up through the remainder of the year, economists said.
Exports posted higher than expected growth in September and GDP growth will probably hit 7.7 percent in 2012 and 8.2 percent in 2013, according to a report from the Chinese Academy of Social Sciences on Friday.
Yet weakened demand for the whole year will almost inevitably affect countries and international corporations with a large exposure to China.
Companies that enjoyed two-digit growth rates will have to adapt to the slower pace of China's economic expansion, said Christoph Nettesheim, senior partner at Boston Consulting Group, Greater China.
"Overall, there's a significant slowdown in the Chinese economy, whether you call it a hard landing or not. That's a more fundamental thing than just a quarter-by-quarter situation."
But Nettesheim noted that the slowdown "very much depends on sectors".
Some companies "are already very worried," while others are not, he said.
Health and general medical care, tourism, education and luxury cars sales are booming while the slowdown is most noticeable in infrastructure, basic resources and materials. It also affects consumer goods, he added.
However, Nettesheim pointed out that even if China's growth slowed to 7.5 percent it is still higher than most other markets.
GDP growth was 7.6 percent in the second quarter, still leading the major emerging economies, such as 5.5 percent for India, 4 percent for Russia, and 3.2 percent for South Africa. Brazil's GDP growth was 0.4 percent from the first quarter.
Nor would a slower China exert a substantial effect on Western economies given their economic structure, said Zhang Jianping, a researcher from the Institute for International Economic Research under the National Development Reform Commission.
This is because manufacturing contributed about 15 percent to GDP in the US. About 80 percent of GDP in the US is generated from the service sector and 90 percent of that comes from its domestic market, Zhang said.
In China, by contrast, manufacturing accounted for 46.8 percent of GDP in 2011 and the sharp decline in exports not only affected China's export-oriented companies, but the whole supply chain.
"China will affect the world economy, to some degree, but it itself is more vulnerable to the fluctuations of the global economy," Zhang concluded.