why china can’t pull up the world - home appliances manufacturers in china
The global economy breathed a sigh of relief: China seems to be recovering from months --long malaise.
China's growth figures are improving.
An agent for infrastructure spending, such as a fixed
Promising asset investment prospects.
Industrial production in construction industry
Related industries, including cement and steel, are on the rise.
Still, this recovery is not as strong as it seems and will not help much to boost growth outside of China.
Consider the situation of construction machinery manufacturers, which is usually a good indicator of infrastructure investment and demand.
Sany Heavy Industry Co. , Ltd.
And Zhonglian Heavy Industry Technology Co. , Ltd.
Both companies had strong sales in the first quarter, with domestic excavator sales up 24% over the same period.
Earlier this month, Sany said that due to the increase in the number and demand of infrastructure projects, core profits are expected to grow by more than 130% in the first quarter.
Some Chinese manufacturers expect demand to grow by 20% this year.
Strangely, foreign competitors such as Caterpillar
Hitachi Engineering Machinery Co. , Ltd.
Not getting the same boost.
Both said sales in China were down and warned of poor results this week.
Caterpillar chief financial officer said in a earnings call this week that the global leader lost mainland market share in the first quarter of this year.
Meanwhile, the Japanese company blamed China for the "downward trend" in sales of hydraulic excavators and said it would decline further.
Shares of 3 m on Thursday.
The company said sales fell by 13% due to Chinese reasons, a factor that the company was "discussing throughout the quarter.
"The results are still lower than the company's expectations, and its prospects are uncertain.
So what is the reason for their different fate?
On the one hand, the latest surge in stimulus measures is targeted to stimulate domestic recovery.
Most of the recent momentum has been driven by a lot of off-site activity.
Budget and fiscal expenditure: about 666 billion yuan ($99 billion)of special-
Financing bonds issued in the first quarter
It's already about half the total amount issued last year. Even on-the-
Book spending rose 15% year-on-year in the first quarter, far faster than 6.
5% for the whole of 2019.
This was an additional 300 billion yuan for the first quarter.
But Beijing is now in tight financial terms.
Komatsu Co. , Ltd. at a China Briefing with analyst Ma Qi
Hitachi also noted that delays in payments and tight funding by local governments were challenges.
They are also under pricing pressure as their Chinese counterparts become more competitive, which is eroding profit margins.
At the same time, China's economic stimulus plan has not been fully reflected. Tax cuts —
$50 billion in the first quarter
Consumer incentives for home appliances and cars did not work.
These measures are nothing more than China's economic stimulus plan in the past.
Most importantly, potential demand remains weak.
Sustained economic growth in China
Enough to boost the global economy-
Companies and families need to spend money.
There are few signs of corporate spending and reinvestment.
According to data from Goldman Sachs Group Inc. , consumption's contribution to GDP remains the weakest since the data was released.
Tax cuts may visually contribute to profits, but will not shake confidence: there will be no benefit for the company to produce more air conditioners if no one buys them.
At the same time, credit conditions are still not loose enough to support a massive recovery, and lenders remain unconvinced.
This has weakened China's ability to boost foreign companies and foreign economies.
According to data released on Thursday, South Korea's gross domestic product shrank its largest in a decade, shrinking by 0.
The first quarter increased by 3% from the previous period.
Goldman Sachs figures show the biggest departure from China's economic growth in the first quarter since the financial crisis.
To some extent, South Korea's economic slowdown, like the recent downturn in German manufacturing, is a reason for its domestic economic downturn.
Still, manufacturing and construction sectors, which are often driven by Chinese industrial demand, have fallen.
Before these changes happen, investors should get used to the idea that China will not be able to drive global growth.
There are too many headaches at home.
At this point, the story: n'janie Trivedi atrivedi39 @ bloomberg ).
NetTo contacted the editor in charge of the story: Rachel Rosenthal of rrosenthal21 @ bloomberg.