American Companies Are Worried About China's Slowing Economy. Here's What They're Saying

As exports slow and the real estate sector weakens, China’s economy has begun to decelerate, and some American companies are beginning to feel the impact.

China’s gross domestic product (GDP) was around 5% in 2023, however, economists expect the country's economic growth to slow to around 4.6% this year and decline further in the coming years. Some corporations that do business in the nation have experienced the impacts of changes to China’s economy.

Some companies like Apple Inc. and Starbucks Corp. posted drops in revenue in the final quarter of 2023, in part because of lagging sales in China. At the same time, others, like Marriott International Inc. and Applied Materials Inc., have strong forecasts for sales in the country.

Here’s what some executives had to say about China during the latest round of earnings calls. 

Apple 

Smartphone sales were down across the board in China, and Apple (AAPL) reported that its sales in China fell by 13% in its December quarter, which CEO Tim Cook said could more closely be tied to its sales of devices other than the iPhone.

Despite the recent contraction, Cook said he was excited about the company’s long-term growth potential in the country, where its iPhone in 2023 became the top-selling smartphone.

“If you look at iPhone in China Mainland, which I think has been the focus of a lot of interest, and you look at it in constant currency, so more of an operational view, we were down mid-single digits on iPhone,” Cook said. “And so it was the other things that drove the larger contraction year-over-year.”

Ford

While Ford Motor Co. (F) delivered a strong earnings report, it forecast losses of as much as $5.5 billion on its line of electric vehicles (EVs), with weakness in China playing a role as the company plans fewer investments in the country, Chief Executive Officer (CEO) James Farley said Feb. 6.

“All of our EV teams are ruthlessly focused on cost and efficiency in our EV products because the ultimate competition is going to be the affordable Tesla and the Chinese OEMs [original equipment manufacturers],” Farley said. “We don't think it's a good time to jump in with both feet in China with EVs, but we're allowing our partners' platforms to lead our electrification.“

However, Farley said China remained a “very profitable overseas market” for gas-powered vehicle sales. 

Starbucks

Coffee seller Starbucks (SBUX) is also feeling the pressure from China’s economy. While same-store sales were up 10% year-over-year in the December quarter, the average ticket for Chinese sales was down 9%.

“We experienced a slower-than-expected recovery in China, driven by a more cautious consumer,”  said Starbucks CEO Laxman Narasimhan. “The market is going through a transition as we see an increase in mass-market competitors.”

The company has plans to address “unexpected headwinds” in that country which include opening more stores there, offering more localized products, and using technology to improve the supply chain, Narasimhan said.

Marriott International 

Hotel chain Marriott International (MAR) pushed its worldwide revenue higher with help from a 17% revenue-per-room increase from its international markets, with growth in China helping to contribute. Company officials said construction of new properties in China was resuming after the country’s strict COVID restrictions led to a pause in some projects.

“When we look at our overall growth in rooms in Asia Pacific, we're in the high‐single digits, that we're looking at, both in 2023 and 2024, including China and Asia Pacific outside of China,” said Leeny Oberg, Marriott International chief financial officer (CFO). 

HSBC

British-based financial institution HSBC Holdings PLC (HSBC) said in its earnings call that it took impairment charges in 2023 related to its business in China.

However, despite the losses, HSBC said it wasn’t forecasting any additional downside for its Chinese associate, Bank of Communications Co. (BoCom), and that its executives were still upbeat on its prospects in China.

“We are also ideally positioned to capitalize as the mass affluent population in Hong Kong and mainland China continues to grow, driven by rapid urbanization across mainland China,” said Noel Quinn, HSBC Group CEO.  “We grew new-to-bank retail customers in Hong Kong by 36% over the last three years, including by capitalizing on the significant increase of visitors from mainland China post re-opening.”

Applied Materials

Chip manufacturing equipment maker Applied Materials (AMAT) reported Feb. 15 that revenue from China jumped 45% in its fiscal first quarter. There’s no indication that such sales are ready to slow down in the country, executives said.

“Just to be clear, we'll expect another quarter in Q2, in our outlook quarter, that it should remain elevated,” CFO Brice Hill said.