American Brands Shudder as China’s Consumers Tighten Their Belts
U.S. companies’ reliance on the country’s giant middle class could turn into a liability.
Buick vehicles from General Motors Co. at a car dealership in Shanghai on July 8, 2018.
Photographer: Qilai Shen/Bloomberg
China has long been a magnet for U.S. brands eager to tap its massive population. Even as the heady days of double-digit economic growth ended this decade, the consumer story rolled on as tens of millions were added to the coffee-sipping, moviegoing, smartphone-addicted middle class, a cohort that exceeds 400 million people.
Starbucks, Apple, and Walt Disney led the charge into China with Chai Frappuccinos, rose-gold-colored iPhones, and films with Chinese actors and locations woven into plotlines. So when Apple Inc. cut its revenue forecast for the first time in almost two decades on Jan. 3, citing weaker demand in China, a chill swept across corporate America. What if Donald Trump’s trade war has done what Beijing’s crackdown on corruption, pollution, and shadow banking, along with rising living costs and slowing wage growth, hasn’t: shaken the confidence of China’s consumer? “The good times are over,” says Michael Every, head of Asia financial markets research at Rabobank in Hong Kong. “Growth will slow, and even if it doesn’t, rising nationalism means U.S. stuff is no longer cool.”