Seeing the "Gravity" of the Chinese Market from the Financial Reports of Multinational Companies
In 2020, China will take the lead in realizing positive growth among the major economies in the world, providing more opportunities for cooperation among countries and injecting more impetus into the recovery and growth of the world economy.
Observing the importance of China to the global economy, tracking the annual performance of multinational companies is one of the most effective ways.
Multinational companies are important participants and promoters of economic globalization. Their financial reports not only reflect their own operating conditions, but are also an effective window for observing major global markets.
Through the recent financial reports released by some multinational companies, we can clearly see the importance of the Chinese market to multinational companies and the global economy, and we can also see how multinational companies can effectively interact with an increasingly mature Chinese market to achieve mutual benefit and win-win results.
A "safe haven" to deal with the impact of the epidemic
In the past year, the new crown pneumonia epidemic has had a huge impact on the global economy, and the operating performance of multinational companies has generally been affected.
A large amount of data also shows that the Chinese market has become an important guarantee for stable business performance of multinational companies.
The catering industry is one of the industries most affected by the epidemic.
Starbucks recently released a quarterly report for the 2021 fiscal year (October 1-December 31, 2020), showing that the company's net revenue was US$ 6.75 billion, and same-store sales fell by 5%, which were lower than market expectations.
However, Starbucks' same-store sales in China increased by 5%, which was the first time since the outbreak of the epidemic to turn positive.
Skechers’ fourth-quarter 2020 financial report and full-year results show that the company’s sales for the quarter were US$1.32 billion, a slight decrease of 0.5% year-on-year, but its sales in the Chinese market increased by 29.7% year-on-year.
In 2020, the sales of major traditional car companies will decline to varying degrees.
Volkswagen’s global sales in 2020 were 9.3 million vehicles, a year-on-year decrease of 15.2%, but it delivered 3.85 million vehicles in the Chinese market, a year-on-year decrease of only 9.1%, the smallest drop among major markets.
The BMW Group’s sales in 2020 were 2.32 million vehicles, a year-on-year decline of 8.4%. However, in 2020, BMW delivered nearly 780,000 new vehicles in China, an increase of 7.4% year-on-year, setting the best sales record since entering the Chinese market in 1994.
Why can the Chinese market become a "safe haven" for multinational companies to respond to the impact of the epidemic?
This is due to China’s huge market potential and a solid economy; on the other hand, because of the remarkable results of China’s epidemic prevention and control, the Chinese government has launched a series of effective measures to expand opening up and promote consumption to promote China’s economy. Achieve a strong recovery.
Whether it is the market certainty constituted by factors such as population base and economic strength, or the policy certainty brought about by a series of favorable policies, multinational companies have produced very stable expectations for the Chinese market.
Multinational companies have used actions to vote, bucking the trend and increasing investment in China.
Starbucks is typical.
In November 2020, Starbucks invested US$156 million in Kunshan, Jiangsu Province to build the Starbucks China Coffee Innovation Industrial Park.
At the 2020 Starbucks Global Investor Exchange Conference, the company stated that it plans to open 600 new stores in China in fiscal 2021 and will enter 230 cities in China before the end of fiscal year 2022, with a total of 6,000 stores.
When talking about the company’s financial report, Dali Shen, president of Honeywell’s global high-growth regions, said that China’s business is one of Honeywell’s biggest highlights in 2020, and the importance of the Chinese market will only grow stronger. Therefore, Honeywell Weir continued to increase its weight in the Chinese market, set up an emerging market China headquarters in Wuhan, signed an investment strategy agreement with Xixian New District, Shaanxi, and signed a number of cooperation agreements with Chinese customers and partners at the CIIE.
Innovation source for global industrial development
For multinational companies, China’s open market and good business environment provide a fertile soil for their development, while China’s innovation atmosphere, human resources and investment environment provide multinational companies with a broader market and sustainable development. Important opportunities have provided a steady stream of impetus for the innovation and development of related industries.
Panasonic clearly emphasized the vitality and potential of the Chinese market in its 2020 financial report, and regards boosting China's business as the key to corporate transformation.
In November last year, Panasonic adjusted the company's organizational structure on a large scale, and its business in China became the focus of adjustment.
As Panasonic moves toward a diversified business market, the Chinese market will become a "test ground" for its new business and management model.
Although some multinational companies have not clearly put forward relevant concepts like Panasonic, after analyzing their business layout, it is not difficult to find the important role of the Chinese market in their innovation and development.
Apple and Tesla are typical.
Apple's 2021 fiscal first quarter financial report shows that its single-quarter revenue reached 111.4 billion US dollars, a record high.
This performance is largely due to the popularity of Apple's first 5G mobile phone in the Chinese market.
Apple CEO Tim Cook said that the iPhone’s replacement and upgrade set a record in China, and China’s 5G network is well-established, the epidemic prevention and control effect is remarkable, and there are still good sales expectations in the future.
In addition to the consumer side, on the production side, a large number of Chinese companies in the Apple industry chain, such as Luxshare Precision and Lens Technology, have made important contributions to the "bull" of Apple products in the global market.
China's "fruit chain" has also promoted the rise of China's smart phone industry and promoted the innovative development and large-scale popularization of smart phones worldwide.
Tesla's innovative products also benefit from the dual drive of Chinese consumption and Chinese manufacturing.
Tesla’s 2020 fourth quarter and full year results report shows that Tesla will deliver about 500,000 vehicles in 2020.
The performance of the Chinese market is eye-catching. The cumulative sales of Model 3 models in the first 11 months of 2020 will exceed 110,000.
The substantial increase in Tesla sales is premised on the increase in production capacity, and Tesla's Shanghai factory has made outstanding contributions.
Tesla's financial report shows that the annual production capacity of Model 3 in the Shanghai plant has reached more than 250,000. Model Y production has started at the end of 2020 and is currently in full production.
The production capacity of Tesla's Shanghai plant is not only used to meet the needs of the Chinese market, but the products are also exported to more than a dozen European countries and regions.
In addition, the production cost of the Shanghai factory is lower than that of the US factory, and the continuous increase in the localization rate of parts and components is an important support for Tesla's continued improvement in financial data.
Refined operation for mutual benefit and win-win
A reporter from the Economic Daily combed through the financial reports of multinational companies and found an important message: multinational companies have a deeper and deeper understanding of the Chinese market, and their business strategies in China have become more refined.
Tesla CEO Elon Musk said in the earnings call when talking about the Tesla FSD fully automatic driving system, that only 1% to 2% of users in China have chosen the FSD fully automatic driving system because Chinese users are more Be cautious and pay more attention to details, "But as long as the product works well in the Chinese market, sales will naturally go up."
As the Chinese market matures, multinational companies continue to strengthen their understanding and analysis of Chinese consumers and the consumer market, as an important basis for companies to adjust their business strategies in China.
The reason why Starbucks' performance in the Chinese market continues to improve is largely because Starbucks conforms to the consumption habits of Chinese consumers and strengthens its online layout.
In July 2020, Starbucks cooperated with Alibaba to fully integrate the Starbucks "Brown Express" service, which focuses on "online point and store pickup", into online platforms such as Alipay, Taobao, and word of mouth.
As early as 2018, Starbucks launched a takeaway business "special star delivery".
According to the Starbucks financial report, the "special star delivery" and "coffee express" services accounted for 30% of Starbucks' sales in China, effectively making up for the loss caused by the decrease in store traffic during the epidemic.
The maturity of the Chinese market is reflected in consumers, as well as in the continuous improvement of China's industrial policies and the new market competition pattern brought about by the development of Chinese enterprises.
These factors are also driving multinational companies to adjust their business strategies.
Among them, the pharmaceutical market is the most typical.
On February 4 this year, Merck announced its 2020 financial report. The company’s pharmaceutical business has global revenues of US$43.021 billion, of which the global sales of PD-1 anticancer drug Creta reached US$14.38 billion, which is a well-deserved "revenue responsibility" for Merck.
Merck did not announce the exact sales data of Kerida in the Chinese market.
However, according to the financial report, the revenue of Merck’s pharmaceutical business in China was US$3.534 billion, a year-on-year increase of 13%, which is Merck’s best-performing market in the world.
It can be judged that the sales data of Kerida in the Chinese market in 2020 is also very impressive.
It is worth noting that this result was achieved because Merck adjusted its market strategy in a timely manner in the face of fierce market competition and policy challenges.
Since Creta was approved in China in 2018, Merck has been continuously exploring sales plans in the Chinese market.
In the new round of medical insurance negotiations, Kerida did not enter the medical insurance list due to lower prices than expected, and all four domestically-made PD-1 drugs were successfully entered.
Merck reacted quickly to this and quickly updated the Kerida drug-giving policy, which reduced the annual drug cost of about 300,000 yuan for a single patient to about 140,000 yuan, and the price reduction reached 53%.
There will be more and more stories of healthy competition between Chinese and foreign companies in the Chinese market.
Reporter Yuan Yong Zhu Lin