Companies Worldwide Feel Effects of China’s Slowing Economy
Created: 2012-07-17 10:30 EST
Both foreign and domestic companies have reported feeling the effects of China’s slowing economy in recent days.
Starting late Friday, major Chinese companies such as electronic equipment maker ZTE Corp., China Eastern Airlines Corp., retailer Suning Appliance Co. and electronics maker TCL Communication Technology Holdings Ltd. have said profits will be lower than expected. As a result, Shanghai’s benchmark stock index fell 1.7% on Monday despite a fairly positive day for Asian markets.
Similar indications were given from sportswear maker Li Ning Co. and Dongfeng Automobile Co. Several foreign companies, including engine maker Cummins Inc. and shoemaker Nike of the US as well as Burberry Group PLC of the UK, have also reported a decrease in demand in China.
On Monday, the International Monetary Fund reduced its estimates for China’s economic growth for the next two years. Its forecast for this year’s gross domestic product growth in China was lowered from 8.2% to 8% and next year’s was dropped from 8.8% to 8.5%.
China has cut lending rates twice since the beginning of June in an attempt to stimulate growth, but experts say the benefits probably won’t be seen until the end of the year.
In the second quarter, the Chinese economy fell to 7.6% growth compared with 8.1% a year ago. It is still the envy of most economies, but it is the slowest rate that China has seen since the global financial crisis.