US companies’ revenue impacted by slower growth in China

China’s economic growth is forecast to slow amid fresh coronavirus outbreaks, denting profits for US firms. But disruptions to Chinese manufacturing could steer factory orders to Southeast Asia.

US companies stand to earn less this year in China as growth slows in the world’s second largest economy. Slowing growth in the all-important China market is likely to hurt revenue among US firms operating in the country, but Southeast Asian manufacturers could gain from disruptions in the Number Two global economy.

China set its 2022 gross domestic product (GDP) growth target at “around 5.5 per cent”, with market consensus forecasting 5.2 per cent. A surge of coronavirus cases in Chinese cities in recent months is impacting the economy, as hardline containment measures have closed in-person services and complicated travel. Construction projects and manufacturing may face suspensions as well.

Slower growth would mean less disposable income for Chinese consumers, especially those left unemployed or cut off from workplaces during current outbreaks. If Chinese market growth slows, there will be a significant impact on these companies’ revenue.

Over the past decade, from Starbucks to Apple, China has typically been a key source of business for US companies, with the Chinese market often accounting for significant proportions of global revenue.