China’s economic rebound is weaker than expected as consumers emerge “stunned” from pandemic-led disruptions and a real estate meltdown last year, according to the head of AP Møller-Maersk.
Vincent Clerc, the new chief executive of the world’s second-largest container shipping group, said, however, that trading volumes associated with the Chinese economy remained resilient with little sign of negative impact from US-led efforts to “decouple” from China.
“When we started the year, there was this hope that as China reopens after Covid we would see a really strong rebound,” Clerc said in an interview in Beijing. “I think we’ve not seen it yet . . . The Chinese consumer is a bit more stunned by what’s happened and is not in a splurging mood right now.”
China has set a growth target of 5 per cent this year — its lowest in decades — after the world’s second-largest economy undershot expectations in 2022 as a result of President Xi Jinping’s strict zero-Covid strategy.
But many economists are hoping for a stronger performance after China abruptly abandoned its Covid-19 controls in December. The IMF is predicting growth of 5.2 per cent in China this year.
However, Clerc said some of Maersk’s customers were drawing parallels with the outbreak of severe acute respiratory syndrome, or Sars, in 2003, when consumers in the hardest-hit areas took time to recover their confidence.
“This is not quite the ‘roaring ’20s’-type mood that one could have expected after this long interruption,” said Clerc, who was among global chief executives gathered in Beijing at the weekend for the country’s annual China Development Forum investor conference.
He said 70 per cent of Chinese savings were in real estate, which has been hit hard by a government crackdown on leverage, while Chinese stocks were also underperforming. The negative mood has been compounded by geopolitical tensions between the US and China.
“It’s not like you get a lot of optimism around when you follow the news and so on, so there may be a bit of a delayed effect as people get back into their [spending] routines,” said Clerc.
Maersk has gained greater exposure to China’s domestic consumer market through its $3.6bn acquisition in 2021 of Hong Kong-based LF Logistics, which has extensive logistics operations on the mainland.
The Danish group is seeking to go beyond its core shipping line business into markets ranging from ecommerce to road and air freight.
Global trade was expected to return to more “normal” levels this year as European and US importers ran down excess inventories that were built up last year to counter supply chain disruptions, said Clerc.
Clerc added that there was no sign of decoupling beyond the high-tech sector, which accounted for a fraction of the volume of China’s exports and imports. “In a way, China has never traded as much with the rest of the world as it did last year, and at the same time we are talking about decoupling so I think it’s a really interesting contrast,” he said.
Maersk has forecast that underlying profits will plunge this year to between $2bn and $5bn, down from the record $31bn it made last year during the pandemic-led boom.
Additional reporting by Chan Ho-him in Hong Kong
