Due to sharp decline in Chinese growth, the present time is
seeing several Western companies carefully examining the position
of their business in China and on the Chinese market. Companies are
keeping an eye out in order to come up with effective solutions of
tackling the bad debt that may be experienced as a result of this
slowdown in growth.
The recent Chinese decline in growth is leading to questions
being raised about the demand and financial stability of Chinese
companies. In the beginning of the millennium, an upwards spurt in
Chinese growth led Western investors to flock to China with their
money and heavily invest there. Will Hallyer, partner, Strategy
Consultants OC&C stated that the previous "land-grab"
mentality of investing heavily first and thinking about growth and
profit later is rapidly changing. Ensuring that the company remains
economically stable and profitable is coming first, according to
Philips NV chief executive Frans van Houten recalls the
electronics company experiencing "fabulous years" in
China, but confirmed that it is now going through a period of
negative order intake. According to van Houten, this means that
future expectations should be more modest and realistic until
market conditions turn round.
Jacques Aschenbroich, CEO, Valeo, stated that the company's
growth rate is anticipated to slow down and the company is
currently reviewing its growth plans accordingly. Ford Motor
Company has responded by cutting production, as affirmed by vice
president Stuart Rowley. As this happens, Western suppliers will
also be impacted.
Strategy and planning varies across different companies. General
Motors are looking at cost reductions, flagging "material cost
performance" while BMW and Luxottica are looking at price cuts
in order to attract the more cautious Chinese consumer. Meanwhile,
Danone are rethinking their Chinese product lines as they become
less competitive on the Chinese market.
Organisations are also taking their credit risk management very
seriously as companies and banks are actively seeking to reduce
credit losses and minimise their exposure to China. UBS-AG stopped
lending money to onshore clients in China, confirmed CEO Sergio
Ermotti. At the same time, companies are still on the lookout for
opportunities, particularly the possibility of acquiring local
companies at a conservative price due to the stock market drop
despite this option being less accessible than desired due to
Although figures are dropping and growth is being halted,
withdrawal from the market is being widely excluded as China's
economy still remains a giant. Ulrich Spiesshofer, CEO of
industrial conglomerate ABB stated that it is only the short-term
that is worrying. Spiesshofer is confident that medium-term and
long-term China "will come back".
Sourced from Tom Bergin, Reuters.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
As per a 2015 survey by Nasscom (the National Association of Software and Service Companies) India has paved the way to secure the third position in the world with three to four startups emerging every day, primarily in the areas of e-commerce, consumer services and aggregators.
Joint Ventures are still a popular investment vehicle for many
foreign investors who do business in China. Sino-foreign joint
ventures can take the form of equity joint ventures or cooperative
Some comments from our readers… “The articles are extremely timely and highly applicable” “I often find critical information not available elsewhere” “As in-house counsel, Mondaq’s service is of great value”
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).