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5 ways China’s slowdown will ripple across globe

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.The Associated Press
Wednesday, February 12, 2014 12:01 am
BEIJING – The reaction was slow in coming, but financial markets and corporate bosses have been jolted awake to China’s relentless growth decline and are scrambling to cope with wrenching changes in global business.For the past decade, China poured money into building factories, highways and apartment blocks. That propelled explosive growth at home and a flood of money to exporters of iron ore and other commodities such as Australia and Peru.

But now, Beijing has put the brakes on that boom. China is far from falling off a financial cliff, but last year’s 7.7 percent growth was barely half of 2007’s 14.2 percent. A look at losers and possible winners from China’s slowdown:China’s voracious appetite for commodities propelled a boom in Australia and emerging economies in Africa and Latin America. With revenues down, exporters are cutting jobs and governments are tightening their spending.

Hardest-hit might be poor countries in Africa or Latin America that might have to cut ambitious plans for spending on education and other social programs.Global companies have long seen China as one of their most promising markets, and most frustrating.

China is the biggest market for Volkswagen AG and some other automakers. Yum Brands, the U.S.-based operator of Pizza Hut, KFC and Taco Bell, already gets half its revenue from China. But U.S. and European companies are being squeezed by tougher competition and by Beijing’s efforts to limit access to promising industries such as clean energy.

Cosmetics brand Revlon Inc. says it will pull out of China. Actavis PLC, a generic drug maker, is leaving too.

The Communist Party has promised to open more industries such as Internet commerce and logistics to foreign competitors. But previous market opening initiatives have been tempered by conditions that include handing technology to potential Chinese competitors.China buoyed the global auto industry after the 2008 crisis. It passed the United States as the world’s biggest car market in 2009, and annual sales still are rising by double-digit rates. But growth is decelerating sharply.

That steps up pressure on China’s fledgling automakers while global rivals add to their market share. Sales by independents grew by 11.4 percent last year, slower than the overall market at 15.7 percent. Their market share slipped by 1.6 percentage points to 40.3 percent.

This year’s market growth is due to slow to about 10 percent. Independents will face pressure to merge or close.Squeezed at home, Chinese companies might try to sharpen their competitive edge by acquiring foreign brands and technology. Past acquisitions include Volvo Cars, Club Med and American meat packer Smithfield. Last month, Beijing-based Lenovo Group bought part of IBM Corp.’s server business and the Motorola mobile phone business from Google.One bright spot is Beijing’s effort to encourage consumer spending. China’s market for consumer-oriented goods such as wheat from Brazil, soybeans from Minnesota and French wine is growing. Such sales could accelerate if Beijing can persuade households to spend more.


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