The CEO of ABB, a Swedish-Swiss multinational robotics firm, expressed disappointment with the current state of the Chinese market and anticipates challenges for the remainder of the year. Bjorn Rosengren, CEO and chairman of ABB, cited a “softening” in China’s property sector as the cause.
Rosengren attributed the decline in the Chinese real estate development and the sector’s substantial debts to the struggles of ABB’s residential construction segment. With a more cyclical nature, this segment is particularly susceptible to changes in the economy.
Regarding China, Rosengren stated, “We are pretty pessimistic at the moment. We thought in the beginning of the year that we should see some recovery from the Covid period, but I think everybody has been pretty disappointed. China continues to be pretty soft. It’s a big market though, so it’s not dead. It’s still living there, but not really developing as we’d hoped. I think it will be challenging for the rest of the year.”
As one of the largest companies in industrial manufacturing globally, ABB’s performance is indicative of the health of the manufacturing sector and the broader economy. Additionally, China serves as the company’s second-largest market, further highlighting its significance.
While ABB remains the leading player in the Chinese robotics market, accounting for over 90% of sales from locally-made products, solutions, and services, signs of weakness have emerged. In the second quarter of 2023, ABB saw a decline of 9% in order intake from China compared to the previous year.
According to credit ratings agency Standard and Poor’s, over 50 Chinese property developers have defaulted or failed to make payments in the last three years. Fitch Ratings withdrew its credit ratings for Central China Real Estate Limited, further highlighting concerns with the Chinese real estate sector.
Economists have raised concerns about structural issues in China’s economy, including debt, an aging population, high unemployment rates among young people, and growing tensions with the United States. The turmoil in the Chinese real estate sector is exemplified by the financial troubles faced by Evergrande, a heavily indebted property developer.
Despite the challenges in China, ABB is experiencing rapid growth in the electric mobility sector globally, especially in China. Bjorn Rosengren noted that electric vehicles (EVs) have become increasingly popular and contribute positively to the robotics market. ABB plans an initial public offering for its e-mobility business, which raised significant investments.
Rosengren emphasized the alignment of businesses and governments in pursuing a green energy future, presenting growth opportunities. The need for green energy generation and the development of electrification infrastructure worldwide contribute to a strong market in electrification.
Though ABB’s e-mobility unit faced challenges due to macroeconomic conditions, the company remains committed to securing a leading market position.
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