Daily Outlook

Is everything so bad in China?

Is everything so bad in China?

China’s economy expanded at a 6.6 percent rate last year, the slowest since 1990 but a pace other major economies can only dream of. The government’s response with targeted stimulus measures has propped up some sectors, and while it’s being tested by the standoff with Trump, many executives are expecting more this year.

Eaton Corp., a Cleveland-based conglomerate, said its China unit continued to perform well last quarter, citing in particular a more than 20 percent jump in sales of excavators. While growth will moderate, “the Chinese government will stimulate at some point during the course of the year, so we do think that the second half of the year is stronger than the first half,” CEO Craig Arnold said on a Jan. 31 conference call.

Many of the companies that have bucked the gloomy trend are consumer businesses. Alibaba Group Holding Ltd. beat earnings estimates, Unilever said China is resilient, while French kitchen-appliances maker SEB SA, a French maker of pressure cookers and saucepans, said it’s still bullish about its two-digit growth forecast for China this year.

Rich Chinese splurged on LVMH’s Louis Vuitton handbags and Hennessy Cognac. There’s even evidence rural shoppers are buying more expensive liquor. But if history is any guide, the wealthy are often the last to feel an economic downturn. Alex Du, a 30-something retail worker in Beijing, says he doesn’t have much savings, and couldn’t afford a car. “Pretty much spend every penny I make,” Du said.

How Bad Is China’s Economic Slowdown? It Depends What You Sell, Bloomberg, Feb 06

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