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Thursday, August 29, 2019, 18:06
Trade spat or not, US companies follow the consumer to China
By Bloomberg
Thursday, August 29, 2019, 18:06 By Bloomberg

A woman pushes a trolley with a teddy bear at Costco's outlet in Shanghai, Aug 27, 2019. (HECTOR RETAMAL / AFP)

In the turmoil of the trade dispute, global American companies are moving to where the consumers are: China.

With fewer Chinese tourists visiting the US, Tiffany & Co moved some of its most expensive jewelry to its Beijing and Shanghai stores last quarter, selling limited quantities of special Tiffany Keys diamond pendants and Tiffany Love Bugs. The New York-based retailer is also upgrading all three flagships in China, including the one in the Hong Kong Special Administrative Region.

From luxury to cheap items, the appetite in China for American things shows no sign of abating

Ford Motor Co, which expects China to become the biggest market for its Lincolns in the next few years, has said it eventually plans to build locally most of the vehicles it sells in the country under that brand, avoiding tariffs. Tesla Inc is focused on getting its plant in Shanghai running by the end of the year. Depending on the timing, the carmaker may manage to avoid the latest round of Chinese tariffs due to take effect in December.

ALSO READ: US tech companies still eager to do business with China

US President Donald Trump responded last week to the latest countermeasures from China by tweeting that US companies are “hereby ordered to immediately start looking for an alternative” to China. In reality, despite the current economic slowdown, China is where future growth is for many global companies facing saturated markets at home, and that makes the country the place to invest for the long term.

Take Starbucks Corp, which is pivoting toward China as it retrenches at home. China is becoming an increasingly important market for coffee retailers as the country’s middle-class tea drinkers develop a taste for java. Starbucks, which has more than a 50% share of the market, is opening one store every 15 hours in the country to stay ahead of a local rival that’s creating intense competition.

China is also the world’s largest aircraft market, and Boeing Co opened its first 737 finishing plant there at the end of last year amid growing trade tensions. The facility, a joint venture with a local state-owned planemaker, is a rare industrial foray outside of the US for Boeing.

From luxury to cheap items, the appetite in China for American things shows no sign of abating. Just this week, Costco Wholesale Corp’s first outlet on the Chinese mainland was so overrun on its opening day, with customers willing to fight over discounted products and wait hours to pay for purchases, that the Shanghai store had to suspend operations temporarily.

ALSO READ: Delinking US economy from that of China difficult, undesirable

Seafood chain Red Lobster, which only has two locations in China today, also sees its future there.

“China is very likely to be our largest international market likely by a pretty wide margin over time.” Chief Executive Officer Kim Lopdrup said in an interview last week.

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