Those companies are counting on the world’s second-biggest economy to pick up the slack from slowdowns in the United States and Europe. But China’s economy could be weakening just as some U.S. corporations ramp up operations there.
Data released Thursday showed China’s economy grew 7.4 percent in the three months ending September, lowest in more than three years, but retail sales showed a slight improvement, rising at 14.4 percent over the first half of the year.
For many years, the prospect of selling to hundreds of millions of newly middle-class Chinese citizens has elevated the Chinese consumer to near-mythical status. But that buying power has not been fully unleashed. As a percentage of gross domestic product, domestic consumption in China is still far lower than in developed economies. And although shipments to China from the United States have grown fivefold since 2000, they made up 7 percent of this country’s total exports last year.
China’s situation presents a test for U.S. multinationals: What happens to your growth when the fastest-growing major economy in the world slows down?
For GM, the breakneck pace of sales has begun to level off. The company recently reported its weakest sales in China in eight months. Buick sales dipped 1.8 percent in September after growing 2.8 percent in August. Sales of Cadillacs fell 8.3 percent.
At a Buick dealership in Beijing recently, a number of salespeople were idling by the door, waiting for customers to come in.
Huang Ke, a sales manager at the dealership, said that he is still seeing a strong appetite for cars but that customers are bargaining harder. European luxury brands, such as BMW and Audi, are slashing prices, causing Buick — which is more popular in China than it is in the United States — to cut some of its prices, too.
“This year is really a test year for the dealers,” Huang said.
In addition to the slowing economy, automakers are up against increasing restrictions on vehicle ownership in China’s cities to curb pollution and traffic.
But Kevin Wale, president and managing director for GM’s China operation, said there is immense room to expand in China. “The market is growing,” Wale said. “It’s just not growing as quickly as it has in the past.”
Wale said that car ownership remains low in China and that GM is counting on growth in cities in central China — away from the more-established cities on or near the coast, such as Beijing and Shanghai.
“The diversity of China is so big that it helps to soften the blow,” he said.
Some analysts say the slowdown presents a chance for the government to shift the underpinnings of Chinese economic growth away from exports and investment and toward domestic consumption, a move that could be good for some U.S. companies.