MNCs in China shrug off fears of slowdown

A production line at Dongfeng Nissan Passenger Vehicle Co's factory in Zhengzhou, Henan province. Nissan, the biggest Japanese carmaker in China, in November predicted "healthy growth" for vehicle sales this year.
A production line at Dongfeng Nissan Passenger Vehicle Co's factory in Zhengzhou, Henan province. Nissan, the biggest Japanese carmaker in China, in November predicted "healthy growth" for vehicle sales this year.PHOTO: REUTERS

BEIJING • Senior executives from Starbucks, Nissan Motor and SAP are playing down concerns about China's slowdown and further potential depreciation of the yuan, with plans to sell more coffee, cars and software in the world's second-biggest economy.

"When you look at the fundamentals, there is nothing wrong with the development of the Chinese economy," Nissan chief executive officer Carlos Ghosn said in an interview in Detroit.

"Particularly for the car industry, I look at China as having a very low level of motorisation still."

Vehicle ownership in China is at about 100 cars per 1,000 residents, far below levels in the United States and Europe, and "it's not going to stay there", said Mr Ghosn.

That echoed the perspective of Starbucks' China head, Mr John Culver, who intends to speed up expansion in major Chinese cities to satisfy the growing middle class. Starbucks plans to open about 500 new stores in the year ending Sept 27 in China, the Seattle-based coffee chain's fastest-growing market, up from 450 the year before.

The companies are betting on higher sales as consumption and corporate spending grows even as yuan volatility and a sustained decline in the currency would erode the value of profits they generate in China.

"We have no intention of slowing down and we remain very optimistic and bullish on the opportunities that Starbucks has in China, both in the short term as well as in the long term," Mr Culver, Starbucks' president for China and the Asia-Pacific region, said in a phone interview on Tuesday.

Concerns over China's economy have hurt markets from Shanghai to New York, with government officials pushing back against expectations that the yuan will continue to depreciate rapidly to prop up the slowing economy.

The type of volatility seen in China's stock market is common in emerging markets and can create opportunities, Asia's richest man, Mr Wang Jianlin said on Tuesday, after announcing the US$3.5 billion (S$5 billion) takeover of Hollywood film company Legendary Entertainment by his Dalian Wanda Group.

In China, where Nissan is the biggest Japanese carmaker, the company in November predicted "healthy growth" for vehicle sales this year, with industrywide sales set to grow an average of 5 per cent this year. Japan's three largest carmakers each sold more than one million vehicles in China last year for the first time on record.

Last October, as China was seeing its slowest growth in a quarter-century, Swedish clothing chain H&M and Uniqlo-maker Fast Retailing also voiced confidence about adding to their exposure there despite the economic slowdown.

SAP chief executive Bill McDermott said at a briefing on Monday in Singapore, before the German software maker reported sales that topped analysts' estimates: "If China sneezes, the world gets some kind of cold, but I wouldn't bet against China."

Given Asia's rising middle class and the job creation that will support, "we have to be focused on this almost single-handedly", he said.

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A version of this article appeared in the print edition of The Straits Times on January 14, 2016, with the headline 'MNCs in China shrug off fears of slowdown'. Print Edition | Subscribe