Yahoo Finance 4 big American brands just confirmed a major economic story unfolding in China
Yum Brands, GM, Under Armour, and Starbucks are all saying the same thing about China.
China is slowing. The world’s second largest economy grew at a 6.7% rate in Q1, which was the slowest pace of growth for the country in seven years.
This is a big concern for a lot of multinational corporations that do business over there.
However, underlying that deceleration is an evolving economy, which is seeing investment cool and consumption heat up. Like the US, China is trying to become an economy driven increasingly by consumption.
And according to some big companies, this shift is for real.
Chinese are eating out
In Starbucks’ (SBUX) quarterly earnings announcement, CEO Howard Schultz highlighted "a stunning 18% increase in revenues and a 5% increase in transactions in China.” Starbucks has 5,918 locations in the China/Asia Pacific region.
Yum Brands (YUM), the parent company of KFC and Taco Bell, is also getting a huge boost from China.
“I’m very pleased with our results in the first quarter, including better-than-expected core operating profit growth of 21%, driven by 42% growth in our China business,” Yum CEO Greg Creed said. “KFC China had an outstanding Chinese New Year bucket promotion leading to 12% same-store sales growth for the quarter, underscoring the power of delivering insight-driven marketing that resonates with our customers.”
China is home to 5,019 KFC restaurants and 1,596 Pizza Huts.
It’s about more than eating out
China’s consumers have also been embracing non-food American consumer brands.
Athletic apparel maker Under Armour (UA) said sales in China tripled. China’s consumer is clearly taking a liking to sneakers worn by basketball phenom Stephen Curry.
In General Motors’ (GM) earnings announcement, CEO Mary Barra pointed to “robust growth in SUV and luxury segments in China.”
“GM expects China’s vehicle market to increase by 5 million units or more by 2020, representing growth of about 3-5 percent annually,” GM management said earlier this month.
Analysts at Credit Suisse recently completed a survey of consumers across the emerging market economies, and they concluded that China’s consumers would continue to lead growth.
“Despite the prevailing concerns over the health of the country’s macro economy, China ranks second in our EM consumer scorecard,” Credit Suisse’s Kevin Yin, Sophie Chiu and Tim Sun said. ”Chinese consumers demonstrate higher confidence levels in income growth and personal wealth, and expect less inflation pressure.“
“We retain our positive long-term outlook for consumption in China.”
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Sam Ro is managing editor at Yahoo Finance
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