FedEx isn't alone feeling China pains

September 19, 2012: 10:53 AM ET

Is China's slowing growth worse than we feared? FedEx cited a slowing Chinese economy as a contributor to its negative outlook, joining a chorus of other multinationals.

China FORTUNE – FedEx, the world's largest air package shipper, sounded the alarms this week on what many corporate executives have feared: China's slowing growth. The world's second-largest economy helped drive global growth when many other economies, including the U.S. and Europe, were still struggling from the global financial crisis.

FedEx CEO Fred Smith on Tuesday warned economic problems in Europe and the U.S. have slowed trade around the world. And he said the impact on China's economy is far bigger than what most observers have estimated. FedEx is a closely watched economic bellwether, as the volume of its shipments offer a broad glimpse of how economies are doing. Already, the company trimmed the amount of planes carrying shipments into the U.S.

FexEx (FDX) isn't alone. Executives at some of the world's largest corporations have also been down on China, where consumers have shown they're hurting, and it's starting to be felt by manufacturers of everything from luxury raincoats to smartphones.

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Last week, British luxury-maker Burberry issued an unexpected profit warning, reporting its worst same-store sales figures since the financial crisis. The crimp in sales signaled broader troubles in China, the world's fastest-growing luxury market. Although the company said the problem isn't simply a China slowdown, Burberry chief financial officer Stacey Cartwright said: "Yes, we are seeing a slowdown in Asia, and yes, China is a significant contributor to that."

To be sure, China's economy could soon turn around. In recent months, the government has cut interest rates and announced a series of bold spending packages aimed at reviving construction and government projects.

Burberry has said it continues to be bullish on China for the long-term.

"Can anyone control China?" asked Burberry chief executive Angela Ahrendts on Monday during an interview with The Wall Street Journal after the company unveiled its Spring/Summer 2013 collection at London Fashion Week. Ahrendts pointed to analyst reports that suggest China would continue growing despite recent setbacks.

MORE: A management guru sounds a Chinese alarm

Taking a similar long-term view is Caterpillar (CAT), even though executives at the world's largest maker of earth-moving equipment told Bloomberg last month that it has slowed production at its main Chinese excavator factory in Xuzhou city, Jiangsu province. This included shutting down the factory for two months in July. Caterpillar also cut working hours in China. As demand for construction and mining equipment falls, the company is exporting most production after it wrongly anticipated that sales would pick up.

Chipmaker Marvel Technology Group (MRVL) is also feeling the pain. Last month, the company warned that it may miss expectations for the current quarter at its mobile chips business in China as PC sales slow. The company makes processing chips for phones that run on a 3G technology used in China and had benefited from the boom in smartphone sales. Marvel expects its mobile and wireless end-market sales to fall in the mid-single digits.

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About This Author
Nin-Hai Tseng
Nin-Hai Tseng
Writer, Fortune

Nin-Hai Tseng covers economics and finance. Before joining Fortune, Tseng was a reporter at The Orlando Sentinel and a public affairs associate at GE. She holds an MPA from Columbia University and a BS in Journalism from the University of Florida. She lives in New York City.

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