We're getting lots of stories now, for the first time in the mainstream press, about the slowdown in China and how severe it is. We are finally getting questions about the health of the economy and how hard the tariffs are hitting the country.
It's difficult to tell. A command economy can pretty much print whatever numbers it wants. If President Xi wants to remain president for life it is presumed that he has to keep the economy humming at north of 6% growth. If it doesn't hit that target then then the numbers are presumed to be jiggered to come up with something that can be adjusted higher.
The one thing the government can't do, though, is make up American earnings sales in China and so far, they are strong, with no slowdown seen except the obvious, Caterpillar (CAT) , which was hurt by weakness in orders to the world's second largest economy. While China represents no more than 5%-10% of sales, far lower than it used to be, it can still hurt their aggregate sales.
Some of that is Cat's own doing because it bought mining equipment maker Bucyrus International for $8.8 billion in 2011, in part because Bucyrus and Caterpillar together were meant to cement its mining business in the country. Bucyrus was the country's largest independent maker of mining materials handling and service. China was committed to coal plants back then. But, wary of the cost of lung illnesses and a backlash from European regulators, it cut back coal plants and has attempted to go green. That means Bucyrus has been a big disappointment.
Given the acknowledged slowdown in the Chinese economy because of the trade tariffs, China's business has deteriorated and is thought to be off about 15% year over year. The other big industrial trader, Boeing (BA) , doesn't seem to have been hurt yet. The SuperMax issue will certainly do so at a certain point but remember there's a true shortage of new planes around the globe and hate it or like it, Boeing will be back.
What is clear, though, is that Chinese consumer sales are doing quite well, much better than expected.
The big companies embedded in China, for the most part, reported what can only be considered spectacular sales. Nike (NKE) reports in a few weeks, but back in June CEO Mark Parker called out strong sales in China, arguably its best growing market. Estee Lauder (EL) , the cosmetics maker, saw excellent growth and added that the company has seen no slowing. And while they are both Canadian companies, Canada Goose (GOOS) and Lululemon (LULU) both reported amazing sales growth in China. The former cited China as a dominant market, one that became dominant in no time. Lululemon is rushing to expand in China to meet demand. They sight particular strength in the country as a reason for its blowout quarter.
Apple (AAPL) , with a low double digit share in China, still reported robust figures for all of its businesses, despite fears of a boycott that simply hasn't happened.
Starbucks (SBUX) just keeps opening stores in China to meet demand, and, again, called it out as one of their best growth markets, if not the best around the world.
One has to wonder whether there isn't a wholesale shift toward internal consumption and away from exporting given that so much of its exports were headed for the U.S. and there is a pervasive fear that 30% tariffs on all goods could be the way things go.
No matter, don't look to China for disappointment, at least not yet. The meager sales we have there, thought to be one 1/5th of what they sell here, remain the best market or among the best markets for all our exporters, confounding the doom and gloom merchants all the way around.
(Caterpillar and Apple is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells CAT or AAPL? Learn more now.)
