HONG KONG — Major US companies, from fast food to high-end fashion, are banking more on Chinese consumers in anticipation of a post-pandemic recovery for the world’s second-largest economy.
Shopkeeper Ralph Lauren Corp.
and Carpet Inc.,
the owner of the Coach and Kate Spade brands, are launching new stores.
And Tyson Foods Inc.
and Hormel Foods Corp.
are opening new facilities, as they see a long-standing appetite for American-style food.
The investments come as Chinese leaders tell the world that the door is open to foreign companies and to Boeing Co.
The moves follow years of “zero Covid” policies that deeply isolated the country and caused its worst economic slump in decades.
Despite the invitation, many companies remain cautious on China as uncertainty about economic health persists and growing geopolitical rivalry with the US traps tech companies and manufacturers.
Many companies increasing their commitments to China are targeting the consumer. They still view China’s huge market as a promising long-term bet, even though sales took a hit during the zero-Covid era.
“I’m more confident than ever that we’re just in the early chapters of our growth story in China,” Howard Schultz, Starbucks’ interim CEO and longtime leader, said earlier this month. The company plans to open 3,000 new stores by 2025, even though sales at the same stores fell 42% in December and 15% in January from a year earlier. Mr Schultz said he is planning his first visit to the country in years in the spring.
Economists predict a pick-up in growth in China, while fears of an economic downturn in Western countries remain. Last month, Goldman Sachs raised its growth forecast for the country this year to 5.5% from a previous target of 5.2%. The main indicators of consumer activity in January showed a significant improvement.
The willingness to invest comes despite a number of obstacles that have only increased since the start of the pandemic. Relations between the US and China are at a low ebb and recent hopes of a détente have been dashed by China’s balloon flights over the US and its stance on Russia’s war in Ukraine.
U.S. companies are also more closely monitored at home for their transactions in China, and Washington has taken steps in recent years to restrict the activities of some business sectors there, from chip companies to clothing manufacturers.
Decoupling remains a buzzword in policy circles as some companies rely heavily on China for their supply chains, including major tech companies such as Apple Inc.
and clothing maker Steve Madden work to diversify where they buy and make their products.
On February 16, China listed two US companies as “untrustworthy entities”, Lockheed Martin Corp.
and a Raytheon Technologies weapon making unit Corp.
, citing the companies’ arms sales to Taiwan. The sanctions were largely symbolic, as US defense companies are generally not allowed to sell weapons to China. A day later, China’s Commerce Ministry, which imposed the sanctions, said the move should not affect other foreign companies in China.
On Feb. 22, China’s Foreign Ministry posted a photo on social media WeChat of a meeting between a top ministry official and Sherry Carbary, the head of Boeing’s China operations. In the past, China has announced sanctions against the company’s defense arm.
The Department “is ready to provide necessary assistance and support to U.S. companies, including Boeing,” the post said. A Boeing spokesperson declined to comment on the meeting.
Before the pandemic, China was one of Boeing’s most important customers. The American airline has said it is eager to resume sales to China. Chinese officials in January approved the resumption of commercial flights for Boeing’s 737 MAX after the plane was grounded for nearly four years following two fatal crashes — one in the Java Sea and the other in Ethiopia.
Another promising sign for businesses: Last month, Walt Disney Co.
said Chinese censors have approved two of its Marvel films for screening in the country, the first releases for the superhero franchise in China since 2019.
At the end of January, McDonald’s said it had opened 700 new stores in China last year and planned to open another 900 this year — more than in any other country and more than twice as many as it plans to open in the U.S. .
McDonald’s chief financial officer Ian Borden told investors it was moving forward with the new store plan even as sales fell year-on-year in China due to Covid-related restrictions across the country.
Ralph Lauren Chief Executive Patrice Louvet told investors that most of the company’s new store openings were in China during the October-ending quarter, and that the company recently opened a new store in the southern city of Shenzhen and a flagship store in southwest Chengdu.
For retailer Tapestry, about half of the $325 million the company has set aside for capital expenditures and cloud computing will go toward new store openings and renovations in China.
“We are confident in China’s long-term opportunity as a growth vehicle,” CEO Joanne Crevoiserat said earlier this month.
Luxury spending in China has generally shown some early signs of a post-pandemic recovery. Both British fashion house Burberry Group PLC and Cartier owner Cie. Financière Richemont SA said sales to Chinese shoppers began to pick up in the new year after reporting declines in their most recent quarterly sales in the country.
China was the luxury industry’s largest market before the pandemic.
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In November, meatpacking company Tyson Foods told investors that of the six new factories the company expects to come online this year, half will be in China.
Hormel — whose CEO Jim Snee told investors last year that sales of Spam and Skippy peanut butter surged in China as lockdowns swept the country — said the company is planning a significant expansion in China to come online in 2024.
An article last month in the state-run China Daily newspaper said Hormel had signed an agreement to build a new $14.6 million factory outside of Shanghai. Tyson did not respond to requests for comment. Hormel declined to comment.
Write to Dan Strumpf at Dan.Strumpf@wsj.com
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