Multinationals' Q3 earnings show China's appeal
Further investment, expansion on the way
Published: Nov 17, 2022 09:30 PM
Photo: VCG

Photo: VCG

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

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

For many car manufacturers, China remained a significant source of demand in the third quarter

The BMW Group cited strong sales in China as one of the drivers behind a year-on-year rise in revenues by more than one-third to nearly 37.2 billion euros ($38.74 billion). "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.

Sales fell 0.9 percent to 587,800 units, but business in China was strong, up 5.7 percent. Europe, on the other hand, saw an 11.1-percent decrease.

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

The catering industry has been one of the hardest-hit by the epidemic. However, Yum China's revenues rose 11 percent to $2.68 billion, and the company opened 239 net new stores in the third quarter.

Food deliveries

With the volatile COVID-19 situation, delivery remained a popular option, which contributed approximately 38 percent of KFC and Pizza Hut's company sales in China in the third quarter, up 4 percentage points year-on-year, it added.

According to food and beverage multinational Danone, its China, North Asia and Oceania divisions posted year-on-year sales growth of 6.8 percent. 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 said that sales in the Chinese mainland rose 20.5 percent to 27.94 billion euros. 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.

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 actually used in the Chinese mainland expanded 15.6 percent year-on-year to surpass 1 trillion yuan ($141 billion) 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 this year.

Unlocking opportunities

"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 launched two pioneering projects in Suzhou, East China's Jiangsu Province, 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 by the China Council for the Promotion of International Trade, foreign-funded companies in China remain upbeat about the market and speak well of China's business environment and macroeconomic policies.

In the third quarter, foreign enterprises' satisfaction ratings on market access, promoting market competition, obtaining business premises and acquiring financial services all increased, the survey showed.

Chinese authorities recently unveiled a wide range 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.