A U.S.-style financial crisis brewing in China threatens to cut both private and public spending there, potentially tanking an economy that many American corporations dearly need to be healthy now. Without the grand economic growth China has provided in recent years, expect some version of the warning “lower due to a slowdown in China” to show up prominently in U.S. earnings reports this year. There are many likely sufferers.
Rumblings about an economic slowdown in Chinese have been heard for months, fueled by signs of a nascent credit crunch as well as a real estate boom that’s led to a massive amount of empty space. The warnings have taken on more authority in recent days as investors watched a drop in China’s stock market help bring down U.S. stocks.
For a fuller exploration of China’s looming economic problems, see Jonathan Laing’s excellent article in Barron’s.
Plenty of U.S. companies could miss growth targets if Chinese consumers cut back on their spending – an inevitability if an economic crises fully presents. The core component of Yum Brands YUM -1.46%’ (YUM) growth plan is building more KFC’s and Pizza Hut fast food joints in China, where it already operates some 4,200 restaurants. Apple AAPL -1.76% (AAPL), which got 15% of its sales from China last year, is planning on expanding its bigger market share there with a phone that costs more than those o...