Western giants are reining in their expansion plans in China in the face of continuing uncertainty as to the depth and length of the global recession. But longer term, their commitment seems as firm as it was back in the pre-Olympic era when China's economy could seemingly put no foot wrong.
Compared with the consumer gloom that reins in mature western markets China appears an oasis of optimism. About 75 percent of Chinese consumers plan to maintain or increase spending in the next 12 months, while almost 60 percent in the US, States and the EU expect to reduce spending, a recent Boston Consulting Group survey found.
Retail sales growth has outperformed GDP growth in the last five years and as Chinese consumers are less leveraged than their debt-laded western counterparts, they are not so directly affected by turmoil in the credit markets. Nevertheless, job losses and the uncertain outlook for China's economy have undoubtedly fed through to the High Street and tempered western firms over-ambitious expectations for the Chinese consumer to spend like there was no tomorrow.
Fast-food giant McDonald's has just opened its 1,000th restaurant in China but said it now expected to open 150 new restaurants in the country this year, down from a planned 175. Ralph Alvarez, chief operating officer, told the Financial Times that the company's plans had been affected by delays in building of new infrastructure such as roads and homes. He also admitted that Chinese consumers, like their counterparts elsewhere, were trading down to cheaper eateries.
Unlike in the west, McDonalds is considered a premium brand in China and so faces competition from local alternatives that are 35 to 40 percent cheaper than western-style eating options.
Metro, the German cash-and-carry giant, has also temporarily scaled back immediate expansion plans as a precautionary measure. But it believes that China's consumer demand is sufficiently robust that it will allow it to almost treble the number of Metro stores in China from 38 to around 100 in the years to come.
Metro also plans to bring its Media Markt electronics chain franchise into China through a deal with Foxconn Technology of Taiwan, and so take on Best Buy of the US, which already has 161 stores in China. However, the first Chinese Media Markt store, planned for Shanghai, will not open until 2010.
More on Metro in this Financial Times story.