China has the world’s third largest economy and its aggressive stimulus program is fueling a rapid recovery from the global recession. That’s good news for struggling US companies
By Kevin Doyle
Only last week, officials at the Illinois headquarters of Caterpillar were questioning the effectiveness of President Barack Obama’s stimulus plan while commenting that “China got it right.”
It seems they aren’t alone in hailing the approach taken by China, which is the world's third-largest economy behind the United States and Japan. The country is expected to be the first major economy to recover from a financial crisis that has decimated business worldwide.
US companies in all sectors that are cutting costs across the board stand ready to reap benefits of the recovery in China – including Caterpillar, the world’s largest manufacturer of mining and construction equipment.
Optimism about China is due in part to an $585 billion Chinese government stimulus package that is stabilizing the market and providing a growth outlet just when they need it most.
"China has been the gold standard on the stimulus package. It was early, large, and well-designed and it's already gotten very substantial results," said Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics.
Caterpillar (CAT.N) Inc CFO Dave Burritt agreed that China's stimulus package was also a driver for his company's better-than-expected sales.
China's gross domestic product growth in the first quarter was only 6.1 percent, the weakest since quarterly figures were first available in 1992, but scorching when compared with the 5 percent contraction expected by economists for the U.S. economy in a recent Reuters poll.
The best opportunities in China may be for companies that can tap into the infrastructure build-out that is part of the stimulus plan, Haas School of Business senior lecturer Paul Tiffany said.
Sandy Cutler, CEO of U.S. diversified manufacturer Eaton Corp (ETN.N), said on Monday he has seen increased orders in Eaton's hydraulics business coming from China, in what he calls the country's stimulus-driven "heartbeat."
Source: Reuters