Growth downturn hits global firms

Updated: 2012-10-15 02:11

By Lanlan and Shen Jingting (China Daily)

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Infrastructure

The heavy equipment maker Caterpillar announced a cut to its 2015 profit target in late September partly due to a slower pace of growth in China that has reduced excavator sales by as much as 30 percent to 40 percent, according to a report by Fitch Ratings.

Kevin Thieneman, China head of Caterpillar, admitted that production is slowing but is optimistic about the economy.

"We are slowing down production and capacity expansion to address customer demand, but we are not stopping, halting or reversing our plans," said Thieneman.

China's economic growth will recover later this year or early next, he said but efforts to stimulate growth, especially infrastructure projects, create business opportunities.

"China is still a key priority for Caterpillar. We remain positive on long-term industry growth in China and our strategy to grow our business here," he added.

Otis Elevator, a unit of United Technologies Corp, also saw the impact on sales due to weaker demand led by curbs on real estate. "There should be more or less some impact on elevator sales but for the long term we have seen that China's continued potential for urbanization and infrastructure development presents a great opportunity for the global elevator and escalator industry,'' said Tom Vining, president of Otis China.

"The elevator industry has been affected and the sales volume of elevators has decreased due to the government's macro-control (on the real estate sector)," he said.

However, there is increasing demand driven by government social housing projects and continued growth in the elevator maintenance market with an annual growth of 20 percent per year.

Otis will give priority to this market and develop it more vigorously, he said.

Also, the increasing demand for elevators in rapidly developing cities in central and western China will also bring great opportunities to Otis, he said.

IT companies

The economic slowdown has hit international IT companies, said Bryan Wang, vice-president & principal analyst at Forrester Research.

Most multinational IT vendors saw growth fall by 5 percent to 10 percent on average in the first six months this year, he said. Hardware makers, including manufacturers of computer communication equipment, suffered most.

Forrester has revised its 2012 growth forecast for China's tech market from 13 percent in January to 10 percent.

Wang predicts China's IT market will be back on track from the fourth quarter, largely due to local government stimulus plans. Customers may become more cautious but this won't affect the telecom industry too much, said Chang Gang, spokesperson for Ericsson China.

"There is still great potential for telecom companies to grow in China," said Chang.

Tech company Broadcom, is also optimistic about China's economic prospects.

China is undertaking significant technology transitions by making huge investments in upgrading existing mobile and wireless infrastructure and networking, said Dana McCarty, vice-president, Asia sales and China country manager of the company.

Contact the writer at lanlan@chinadaily.com.cn

Ding Qingfen and Li Fangfang contributed to this story.

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