The Gulf Time Newspaper One of the finest business newspapers in the UAE brought to you by our professional writers and editors.
Bloomberg
US companies counting on China for a major part of their growth have targets on their backs as Beijing and Washington ratchet up trade-war tensions.
President Donald Trump’s decision to blacklist Huawei Technologies Co, the Chinese maker of smartphones, while also threatening bans on other Chinese technology companies, could open the door to retaliation against US brands from hotels to sportswear to even Captain America.
As companies await China’s next move, there is uncertainty about what form retaliation might take. Companies might “just have to read the tea leaves on how their business operations are being treated,’’ Erin Ennis, senior vice president of the US-China Business Council, said in an interview with Bloomberg Television.
China could use the template it honed in 2017 when relations with South Korea deteriorated over Seoul’s decision to deploy a missile shield. The government curbed travel to South Korea, hurting cosmetics companies that rely on Chinese tourists, while local authorities shut most of Lotte Shopping Co’s China stores, alleging fire safety violations. Consumers boycotted South Korean products, dealing a devastating blow to Hyundai Motor Co’s sales.
There’s a lot at stake, as China’s fast-growing consumer market is a top priority for US giants looking for growth in a slowing global economy. Here’s a look at the most vulnerable American companies with heavy exposure to the country:
Apple’s Crunch
The most obvious target is Huawei’s smartphone rival Apple Inc, which gets about a fifth of its revenue from China and manufactures its iPhones there. The Cupertino, California-based company has already been suffering in the region, seeing sliding revenue as consumers buy more phones from Huawei and other local brands.
Blowback from Trump’s Huawei ban could cost Apple about 3 percent to 5 percent of its iPhone sales in China over the next 12 to 18 months, according to Dan Ives, an analyst at Wedbush Securities.
Huawei’s founder, Ren Zhengfei, took the high ground in an interview with Bloomberg Television, saying China shouldn’t punch Apple. If that does happen, the billionaire added, “I’ll be the first to protest.’’
Despite trade wars and a slowing economy, “the huge story still is China,†according to the world’s largest hotelier.
Marriott International Inc will open more than 30 hotels in China this year and has more than 300 new hotels planned for the country — more than half of its total in the Asia-Pacific region.
Yet the Bethesda, Maryland-based company is no stranger to Chinese political risk. It apologised last year after violating a government taboo by listing both Tibet and Taiwan as separate countries on its website. Marriott also was the victim in November of one of the biggest corporate hacks in history, with media reports saying it may have been the work of an intelligence-gathering operation by China’s government.
China is an increasingly important market for Nike Inc, which sponsors the Shanghai Marathon and the top Chinese soccer league. In the quarter ended in February, Greater China revenue soared 24 percent, the 19th consecutive quarter of double-digit gains.
Nike’s position in China is far from secure, as consumers can easily switch to local rivals like Anta Sports Products Ltd, which last year agreed to a $5.2 billion deal to buy Finnish company Amer Sports Oyj.