Chinese economy cools impact world manufacturers

Chinese economy cools impact world manufacturers

BOSTON — As the Chinese economy cools, some big U.S. and European companies are losing what had been one of their surest growth bets.
Beijing in March cut its official forecast for 2012 economic growth to an eight-year low of 7.5 percent, which analysts said signaled that the authorities would be more focused on economic reforms than stimulus.
Caterpillar, 3M, United Technologies and ABB are among the manufacturers that have reported weak performances in China in the first quarter as economic growth has slowed nearly to a three-year low.
That is making investors nervous, though some Western chief executives predict a return to rapid growth in China, fueled by the government’s easing monetary policy and expansion into faster-growing cities inland.
Caterpillar’s sales in China fell between $250 million and $300 million in the first quarter, pushing the company, the world’s largest maker of earth-moving equipment, to export to other countries a large share of the equipment such as , , made in China. “We are introducing programs inside China to work with dealers to get some of that inventory in the hands of customers, ” said Caterpillar’s chief executive, Douglas R. Oberhelman.
Concerns about China overshadowed better-than-expected earnings at the company, which is based in Peoria, Illinois, and led investors to push the stock down 5 percent Wednesday. The shares’ value stayed flat Thursday.
The Swiss engineering group ABB, a maker of power equipment, reported profits in the past week that were below analysts’ expectations, caused by weak Chinese demand.
“It was a very slow start to the year for China. China in January was extremely weak, ” ABB’s chief financial officer, Michel Demaré, said Wednesday.
To be sure, not every Western company is suffering in China. Apple, for example, reported a fivefold gain in sales of iPhones in mainland China, Hong Kong and Taiwan, helping quarterly profit shoot past market expectations.
But Chinese government measures to cool an overheated housing market have weighed on consumer and industrial demand in recent months, prompting Western executives to replace the superlatives they usually employ to describe China with less-rosy terms like “tough” and “mediocre.”
“Our business in China is off to a slow start, ” said Gregory J. Hayes, the chief financial officer of United Technologies, whose Otis arm is the world’s biggest maker of elevators. The unit’s China sales dropped 9 percent in the first quarter. “The ongoing government effort to bring housing prices down has negatively impacted the higher end of the residential sector, which represents about half of Otis’s China sales, ” he added.