Multinationals' earnings reports put China appeal under spotlight

Source: Xinhua / Updated: 2022-11-15

The Chinese market has proven to be a reliable engine many multinational firms cannot afford to lose or even neglect in a tough time, as the latest financial reports of many world-renowned brands have revealed.

From automobiles to consumer goods, multinationals such as BMW, Yum China, and L'Oreal logged robust market growth in China in the third quarter (Q3) of this year. It boosted their corporate revenues facing headwinds, including the lingering COVID-19 pandemic, disrupted supply chains, weakened consumer sentiment, and rising production costs.

REVENUES FROM CHINA

For many car manufacturers, China remained a significant source of demand in Q3.

The BMW Group cited strong sales in China as one of the drivers behind a year-on-year rise in its Q3 revenues by over a third to nearly 37.2 billion euros. "Contributing to this were solid pricing for new and used cars, a favorable product mix, and, in particular, revenues from the Chinese joint venture," the company said in a press release.

The company's sales were down 0.9 percent to 587,800 units compared with the same quarter of 2021, but its business in China was strong, up 5.7 percent. Europe, on the other hand, saw an 11.1 percent decrease in the third quarter.

Another automobile giant, Volkswagen Group, saw a recovery in China accelerated with a 26 percent increase in deliveries in Q3, according to its financial report. In particular, regional demand for battery electric vehicles continued to grow, and deliveries more than doubled in the year-to-date to 112,700 units.

The catering industry has been one of the hardest hit by the epidemic. However, Yum China's total revenues rose 11 percent year over year to 2.68 billion U.S. dollars, and the company opened 239 net new stores in Q3, its earnings report showed.

With the volatile COVID situation, delivery continued to be a popular option, which contributed approximately 38 percent of KFC and Pizza Hut's company sales in China in Q3, an increase of four percentage points from the prior year period, it added.

According to food and beverage multinational Danone's Q3 financial report, its China, North Asia, and Oceania divisions posted a year-on-year sales growth of 6.8 percent in Q3. In China, infant milk formula sales registered competitive growth on a high base, while adult nutrition and pediatric specialties reported another quarter of outstanding growth.

French beauty giant L'Oreal Group saw its sales in the Chinese mainland in Q3 go up 20.5 percent yearly to 27.94 billion euros. In addition, the company said it strengthened its position in e-commerce in China, topping the rankings on the emerging TikTok platform, with L'Oreal Paris being No.1 in skin care.

MORE INVESTMENT ON THE WAY

Eyeing China's huge and more open market, improved business environment, high-quality development, and sustained economic recovery, many multinationals are doubling down on their investments in the world's second-largest economy.

Data from the Ministry of Commerce showed that foreign direct investment in the Chinese mainland, in actual use, expanded 15.6 percent year on year to surpass 1 trillion yuan (about 141 billion U.S. dollars) in the first three quarters of 2022.

Yum China announced on its website that it aims to open approximately 1,000 to 1,200 net new stores and make capital expenditures of 800 million to 1 billion dollars this year.

"Looking ahead, we are confident about unlocking the long-term opportunities in China. The strong performance of our new stores gives us the confidence to open new and profitable stores at a robust pace," Joey Wat, CEO of Yum China, was cited in the report as saying.

Last month, L'Oreal China inaugurated two pioneering projects in the city of Suzhou by laying the foundation stone of its first direct-to-consumer intelligent center and announcing the opening of its new healthy beauty workshop in the Suzhou factory.

According to a recent survey conducted by the China Council for the Promotion of International Trade, foreign-funded companies in China remain upbeat about the Chinese market and speak well of China's business environment and macroeconomic policies.

In Q3, foreign enterprises' satisfaction ratings on market access, promoting market competition, obtaining business premises, and acquiring financial services increased by 1.99, 1.84, 1.52, and 1.43 percentage points, respectively, compared with the second quarter, the survey showed.

To speed up the pace of innovation in the Chinese market, Volkswagen's software unit Cariad set up a joint venture with Chinese technology company Horizon Robotics to accelerate the regional development of advanced driver assistance systems and autonomous driving systems for the Chinese market.

Recently, Chinese authorities unveiled a slew of measures, including opening more sectors to foreign investment by issuing a new catalog of industries for foreign investment and facilitating the implementation of the negative list for foreign investment to transform opening-up policies into concrete projects.

"The recent messages from the Chinese government on continuing to attract foreign investment, expand opening-up, and drive innovation are encouraging. We are optimistic about the Chinese market's medium- and long-term prospects," Oliver Zipse, chairman of the Board of Management of BMW AG, told Xinhua in an interview.

"The BMW Group is unwaveringly committed to China and will continue its win-win-partnerships with local companies," he noted.