SINGAPORE – Senior executives from Starbucks Corp. to Nissan Motor Co. and SAP SE are playing down concerns about China’s slowdown and further potential depreciation of the yuan, with plans to sell more coffee, cars and software in the world’s second-biggest economy.
“When you look at the fundamentals, there is nothing wrong with the development of the Chinese economy,” Nissan Chief Executive Officer Carlos Ghosn said in an interview in Detroit. “Particularly for the car industry, I look at China as having a very low level of motorization, still.”
Vehicle ownership in China is at about 100 cars per 1,000 residents, far below levels in the U.S. and Europe, and “it’s not going to stay there,” said Ghosn.
That echoed the perspective of Starbucks’s China head, John Culver, who intends to speed up expansion in major Chinese cities to satisfy the growing middle class. Starbucks plans to open about 500 new stores in the year ending Sept. 27 in China, the Seattle-based coffee chain’s fastest-growing market, up from 450 the year before.
The companies are betting on higher sales as consumption and corporate spending grows, even as yuan volatility and a sustained decline in the currency would erode the value of profits they generate in China.
“We have no intention of slowing down and we remain very optimistic and bullish on the opportunities that Starbucks has in China, both in the short term as well as in the long term,” Culver, Starbucks’s president for China and the Asia-Pacific region, said in a phone interview Tuesday.
Concerns over China’s economy have hurt markets from Shanghai to New York, with government officials pushing back against expectations that the yuan will continue to depreciate rapidly to prop up the slowing economy. The People’s Bank of China repeatedly intervened in the overseas yuan market Tuesday, according to people familiar with the matter, as the currency tumbled to a five-year low against the U.S. dollar.
On Wednesday, the yuan traded in Hong Kong headed for its biggest five-day gain on record as China’s central bank steadied the currency’s fixing and intensified efforts to curb outflows. Stock indexes in Shanghai, Shenzhen and Hong Kong rose.
The type of volatility seen in China’s stock market is common in emerging markets and can create opportunities, Asia’s richest man, Wang Jianlin, said Tuesday, after announcing the $3.5 billion takeover of Hollywood film company Legendary Entertainment by his Dalian Wanda Group Co.
“We deal in 70 countries around the world, and foreign currencies change and fluctuate in all countries,” said Culver, who was visiting the western Chinese city of Chengdu with Chief Executive Officer Howard Schultz. Starbucks hasn’t seen any impact on its operations due to the recent yuan volatility, he said.
Starbucks had said last January it actively hedges against foreign-exchange risks and was able to offset the impact of a stronger U.S. dollar. Culver declined to comment on how the coffee chain hedged against the currency’s slide.
In China, where Nissan is the biggest Japanese automaker, the company in November predicted “healthy growth” for vehicle sales in 2016, with industrywide sales set to grow an average of 5 percent this year. Japan’s three largest automakers each sold more than 1 million vehicles in China last year for the first time on record.
Last October, as China was seeing its slowest growth in a quarter century, Swedish clothing chain Hennes & Mauritz AB and Uniqlo-maker Fast Retailing Co. also voiced confidence about adding to their exposure there despite the economic slowdown.
“If China sneezes, the world gets some kind of cold, but I wouldn’t bet against China,” SAP CEO Bill McDermott said at a briefing Monday in Singapore, before the German software-maker reported sales that topped analysts’ estimates. Given Asia’s rising middle class and the job creation that will support, “we have to be focused on this almost single-handedly,” he said.