That's not surprising given the slump in China's real estate and stock markets. Shanghai's composite stock index is down more than 60% from the start of the year, and new home sales in onetime boom cities such as Shenzhen have fallen 50% this year.
Retailers of everyday goods can expect to do better in China, but they too are feeling the strains of a slowdown. Yum Brands Inc., owner of the KFC, Taco Bell and Pizza Hut chains, is adding more than 600 restaurants in China this year, and expansion in 2009 is expected to remain brisk. But sales at restaurants open at least a year were up 5% in the latest quarter, down from an 11% increase in the third quarter of 2007.
Consumer spending accounted for 35% of China's economy last year, compared with about 64% in the U.S. Beijing wants to spur domestic spending and rely less on exports and investments, which make up about half of China's economic output. That could spell a cut in taxes and relief for developers and home buyers soon.
China's central government is also expected to reach into its own deep pockets, plowing tens of billions of dollars into projects such as high-speed rail, gas transmission pipelines and power plants to create jobs and keep businesses busy.
"The government is going to actively and more quickly implement infrastructure development," said Amy Sommers, an attorney at Squire, Sanders & Dempsey's office in Shanghai. At the same time, she said, Beijing will be looking to attract more foreign investments in higher-value areas, such as green energy and new technologies for agricultural, environment and industrial use.
That should help companies like GE, which last month signed a strategic partnership with Hubei province, where the capital city of Wuhan is building a subway and expanding its airport. Shanghai, meanwhile, is ramping up for the World Expo in 2010, opening new opportunities for foreign businesses. AEG, the Los Angeles sports marketing firm that owns Staples Center and the Los Angeles Kings, last week announced, with the National Basketball Assn., new arena projects in Shanghai and Guangzhou.
Still, with exports expected to weaken further and joblessness rising, analysts say the slowdown in manufacturing will spread to other sectors of China's economy, including the transportation and hospitality industries.
"China is very much part of the global economy," said Andy Xie, an independent economist based in Shanghai, adding that export orders dropped sharply in September.
"For businesses, they have to live with the downturn," he said. "They can't dream about some hot spot to bail them out."
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don.lee@latimes.com
