Present global economy undergo small difficulty

Present global economy undergo small difficulty

The sustainability of China’s growth has become a bigger concern for investors as Europe’s economy has soured, leaving companies more dependent on emerging market demand.
The Finnish escalator maker Kone Oyj said growth in its Chinese markets would slow from 10 percent in the first quarter to between zero and 5 percent in the second. The truck maker Volvo AB cut its forecast Thursday for the Chinese construction equipment market this year to a fall of 15 to 25 percent from an outlook for a flat market.
One way companies are planning to increase growth is to focus on secondary cities in the Chinese interior, where the clampdown on the housing market is not as tight. The German fashion house Hugo Boss said it would open its own stores and expand into smaller cities to increase its business in China.
Most executives are still optimistic about the long-term growth prospects for China and see nothing more than a bump in the rise of the Chinese economy, the world’s second-largest, after that of the United States.
 “Despite China’s slowdown and structural adjustment toward a consumption-driven economy, its inland provinces are experiencing and will experience double-digit growth over the next decade, ” Cynthia Carroll, chief executive of the miner Anglo American, told investors at the company’s annual general meeting recently.
However, analysts and executives acknowledge there are challenges. Schneider Electric noted that part of the slowdown in its business in China was the result of weaker demand from companies that rely on exports to Europe, which have been hit by the Continent’s debt crisis.
Even when China’s growth picks up, it may never return to the heady days of the past decade, some executives said. In the automotive sector, for instance, Chinese car sales surged 46 percent in 2009, a rate unlikely to reoccur, with executives and analysts saying an eventual annual growth rate of 7 percent to 8 percent is more likely in the coming years.
But even a slower-growing China offers opportunity for big U.S. companies, said Wayne Titche, the chief investment officer at AMBS Investment Counsel, whose stock holdings include General Electric, 3M and Parker-Hannifin.
“People are always nervous about China, ” Mr. Titche said. “So far they’ve been able to keep things going. They’re still expecting 8 percent growth instead of 10 percent growth.”
The chief executive of Ingersoll Rand, a manufacturer of air conditioners, locks and other products used in buildings, agreed with that assessment.
“Weaker China, I think, will be a short-lived phenomenon, ” said the Ingersoll executive, Mike Lamach. “I do think you’ll see recovery there in coming quarters.”
 

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