Foreign firms set to change policy on Chinese market as economic slowdown hits communist regime

The slowdown in China's economy has pushed many foreign companies to rethink on their heavy reliance on the Chinese market as the spiral economic downturn will have direct negative impact on their businesses, media reports said.


ANI | Beijing | Updated: 29-07-2022 19:18 IST | Created: 29-07-2022 19:18 IST
Foreign firms set to change policy on Chinese market as economic slowdown hits communist regime
Representative Image (Photo Credit: Reuters). Image Credit: ANI
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The slowdown in China's economy has pushed many foreign companies to rethink on their heavy reliance on the Chinese market as the spiral economic downturn will have direct negative impact on their businesses, media reports said. The companies that flocked to the country to partake in boom times are being confronted by a sobering reality -- flat growth in what was once seen as a reliable economic opportunity.

For instance, in 2010, a 123-year-old luxury mattress manufacturer, A.H. Beard, saw a huge potential in China's massive 1.4 billion consumer base. Australia also courted for business in China for its growing middle class with a taste for premium brands. All in all, it seemed like a good place to expand, reported New York Times. A.H. Beard, the family-owned company, faced looming competition from low-cost, foreign-made mattresses in its home market. It was indeed a good choice, however, that was 2010 and more than a decade later the events have reversed and the markets toggled.

The company opened its first store in China in 2013. Before the coronavirus pandemic, sales in the country were growing more than 30 per cent a year. There are now 50 A.H. Beard stores across China, with plans to open 50 more. However, like most foreign businesses and industries operating in China nowadays, A.H. Beard has also started to think more carefully about its strategy. This is also attributable to China's stern COVID-19 policies and harsh lockdowns.

All of these are taking a heavy toll on businesses. The company's exports into China are no longer on the rise. As per the official figures of this month, the Chinese economy grew at its slowest pace since the early days of the pandemic. The economy is marred by unemployment and the housing market is in crisis. The businesses are living under the constant threat of lockdowns, as per the media portal.

Gone are the days when the Chinese economy was resilient. However, the country looks shaky now. Speaking on the economic downturn in China, Tony Pearson, chief executive of A.H. Beard said, "I certainly don't see China returning to the rates of growth that we had seen previously."

As the situation stands right now, most companies are staying afloat, however, there is a lingering caution which did not use to be there. And it is not just the economic downturn in China but also the geopolitical tensions in the region. A US-China trade war has unleashed punishing tariffs for some industries. Covid-19 has snarled the flow of goods, lifting the prices of almost everything and delaying shipments by months. China's pandemic response of quarantines and lockdowns has kept customers at home and out of stores.

A.H. Beard opened its flagship store with a local partner in Shanghai almost 10 years ago. And like any high-end brand, it rolled out products with prices that defy belief. China became the best-selling market for its top-of-the-line USD 75,000 mattress. Since then, the cost of shipping a container has jumped sixfold. The cost of mattress materials and components, such as latex and natural fibres, has increased significantly. Other worrying signs have emerged, including a housing slump.

A more frugal Chinese consumer is a worry for foreign businesses, many of which offer products that are not the low-cost option but a premium alternative. A Jun-Min, chief executive of Ginseng by Pharm, a South Korean producer of ginseng products, said he, too, has noticed Chinese "wallets have gotten thinner." (ANI)

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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