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China’s economic slowdown is starting to weigh on some of the world’s biggest businesses.
From Silicon Valley to Detroit, big international companies are feeling the effects from the downturn in the world’s second-largest economy.
Growth in China last year was the weakest it has been in nearly three decades and the outlook for 2019 could be worse, as the trade war with the United States continuesto damage the economy.
A number of big companies have already said their sales are suffering as a result of China’s economic slowdown.
This week, US construction machinery maker Caterpillar
(CAT) said its biggest earnings miss in a decade was partly due to lower demand in China. Hardware manufacturerStanley Black & Decker
(SWJ) has similarly highlighted weakening demand in China’s construction industry.
Shares in Nvidia
(NVDA) tumbled on Monday after the computer chip maker slashed its sales outlook for the fourth quarter, blaming “deteriorating macroeconomic conditions, particularly in China.”
Shares in Nvidia tumbled on Monday after the computer chip maker slashed its sales outlook for the fourth quarter.
SAUL LOEB/AFP/Getty Images
Earlier in January, Apple
(AAPL) roiled global markets after it saidit expected a weaker Chinese economy to hurt its sales numbers. CEO Tim Cook said in a letter to investors that the company had been blindsided by “the magnitude of the economic deceleration” there.
China is hugely important to Apple, making up about 15% of the company’s global revenues. Samsung, another smartphone maker, could also be hurting due to China’s slowdown.
Who’s at risk?
Experts think there are likely more international businesses exposed to China’s faltering growth.
Sectors like luxury goods and automobiles, which count China as one of their biggest global market, could be hit particularly badly as Chinese consumers dial back purchases.
“After a strong run over the last two to three years, luxury brands are going to struggle,” said Ben Cavender, an analyst at research firm China Market Research.
The auto industry looks particularly vulnerable. For a number of top international carmakers, China brings in more revenue than the United States or Europe. But last year the Chinese car market shrank in terms of sales.
For a number of top international carmakers, China brings in more revenue than the United States or Europe.
Qilai Shen/Bloomberg via Getty Images
Electric carmaker Tesla
(TSLA) could be the next to face pressure. Tu Le, Beijing-based founder of research firm Sino Auto Insights, said the fact the California-based company has been cutting prices in Chinawas not a good sign.
“Tesla sales in China are being affected by the softness in the market,” he said. The company is also facing increasing competition in China from a number of local rivals.
Things could also get worse before they get better for big US auto brands like GM
(GM) and Ford
(F), which have seen their China sales slow.
Who’s doing OK?
Some of the world’s biggest consumer names so far appear to be withstanding the China downturn. Retail sales in China have so far held up well as the economy slows, with the country expected to become the world’s top consumer market next year.
Procter & Gamble
(PG), which makes Pampers diapers and Tide laundry detergent, said earlier in January that it does “not see a sign at this point of slowdown of the consumer in China.”
Starbucks, America's biggest coffee chain, faces increasing competition in China.
Zhang Peng/LightRocket via Getty Images
Similarly, sportswear makers Adidas
(ADDDF) and Nike
(NKE) are not sweating over Or weposition in China just yet. Adidas
(ADDDF) CEO Kasper Rorsted said in November that the European firm was still seeing strong growth in this market, but could see a “slight slowdown” in the first quarter of 2019.
Nike’s CFO Andrew Campion said in December the company sees “very strong signs of momentum in China.”
PVH
(PVH), which owns fashion brands Calvin Klein and Tommy Hilfiger, said late last year that it continues “to see strong results out of China,” despite the slowing economy and trade tensions.
Starbucks
(SBUX), America’s biggest coffee chain, faces increasing competition in China, but CEO Kevin Johnson said this month that the company’s leaders “remain bullish” on the market.
