Beijing’s ongoing “zero-COVID” campaign is slowing both the Chinese and global economy, causing supply chain disruptions felt around the world. The harsh pandemic measures are also hurting American businesses by China.
“Conditions in China are such that we have virtually no ability to predict our performance in China in the second half. of the year,said Starbucks Acting CEO Howard Schultz on May 4, as reported by CNBC.
Lockdown measures in Shanghai and other commercial cities have shuttered factories used by Nike, Tesla and many other American brands. Even factories that remained open struggled to receive deliveries of parts and materials.
Although retail sales in China increased by 3.3% for the first quarter, they were down 3.5% for March year on year. walking retail numbers were the lowest since the start of the pandemic. In the same month, unemployment reached 5.8%which increased by 3 percentage points compared to the previous month.
Last year, 10.7 million students finished college and entered the workforce. Next month, after graduation from universities, a similar number of young people will be looking for jobs. Yet their main employment destinations – Shanghai, Shenzhen and Beijing – are in varying degrees of lockdown.
American filmmakers, who have come to rely on China as one of the largest markets in the world, have taken a hit as thousands of cinemas remain closed. As of April 17, total box office admissions across China were 28 percent below what it was at the same time last year. The five-day May Day holiday is usually one of the biggest box office weekends of the year. This year he was the lowest.
The recent COVID shutdowns and economic contraction come after several years of China’s growing regulatory regime and Chinese leader Xi Jinping’s crackdown on several industries. Therefore, it is likely that even after the COVID-related disruptions end, public policies devoted to greater prosperity and redistribution of wealth associated with campaigns to make China economically independent will eat away at the long term profitability American firms in China.
Starbucks China reported comparable store sales were 23% lower in the first trimester this year compared to last year.
Apple predicts that sales in China will be down to $8 billion this quarter, which means a loss of $4 billion.
DuPont expects slower volume growth and shrinking margins.
Estée Lauder initially forecast revenue growth of 14.5% this year, but with its fiscal year ending in June, it has revised its expectation down to between 7% and 9%.
The CEO of Yum Group, which operates US fast food chains KFC, Taco Bell and Pizza Hut, has predicted that unless lockdowns are lifted, it will expects losses in the second trimester. Yum sales in March were down 20% year over year.
Shares of highly exposed US companies in China have lived prices go down. Nike and Starbucks have been downward trend since January, while Apple’s share the price has been erratic since January and trending lower since early April. Nike is counting on China to about 18 percent of its sales. About 17 percent of Apple’s revenue and 26.5% of Intel is generated in China.
The list of companies most exposed to China may surprise you. Wynn Resorts, which operates three casinos in Macau, shoots 75.2 percent of its income from China. Qualcomm, the semiconductor giant, makes 66.6% of its revenue in the country. China accounts for 44.3% of Texas Instruments’ revenue. The stock loss has impacted the stock price of these companies as investors go bearish in China.
Analysts report that the combined impact of the U.S.-China trade war, now entering its fourth year, and ongoing COVID lockdowns are pushing foreigners companies to abandon China or plan to leave temporarily. A poll by expat magazine That’s Shanghai found that 85% of foreign respondents would reconsider their stay in China. On the other hand, many companies see maintaining a presence in the largest market in the world as an important business strategy. Of course, if you are not authorized to operate, you cannot earn money.
What all of this means for the United States and the rest of the world is higher prices and continued shortages. Shelly SimpsonChief Commercial Officer of B. Hunt Transport Services Inc., told the Wall Street Journal on May 4 that even though the lockdowns are soon to be lifted, the current supply chain disruptions will be felt in America throughout the summer.
The opinions expressed in this article are the opinions of the author and do not necessarily reflect the opinions of The Epoch Times.