"ABB's Bjorn Rosengren commented that China has not progressed as initially expected this year, attributing this to the instability of the Chinese real estate market. The country, renowned for its production capabilities, is the second most significant market for ABB and has experienced distress within its property sector since 2018, with the collapse of Evergrande having a notable impact.
Bjorn Rosengren, the CEO and Chairman of ABB, expressed disappointment with the Chinese market when speaking with CNBC's Joumanna Bercetche Wednesday, citing a softening in the Chinese real estate sector and heavy debts as factors for the weakening. Rosengren stated that he and the company were "pretty pessimistic" and "disappointed" with the situation as they had expected a recovery from the Covid period at the start of the year. He explained that the current forecast is for it to be "challenging" for the remainder of the year.
ABB, a major global presence in industrial manufacturing, has machines in many major corporations' factories, providing a measure of the health of the manufacturing and wider economy.China being a major powerhouse in this sector, ABB claims to account for over 90% of sales from locally-made products, solutions and services there. However, ABB reported that orders declined 9% on a comparable basis in the second quarter of 2023. It saw an overall increase in orders, to $8.7 billion, and comparable revenues, to $8.2 billion, with income from operations increasing 15.9%, to $1.3 billion.
Over the last three years, Standard and Poor's has reported that more than 50 Chinese property developers have failed to make payments or defaulted. In July, Fitch Ratings withdrew their ratings of Central China Real Estate Limited, a Hong Kong-based investment holding firm. Economists have recently suggested issues in the Chinese economy, including debt, an aged population, and lack of employment for young people, as well as the potential for a 'decoupling' from different countries due to heightened tensions with the United States. The Chinese real estate industry has been in a state of commotion over the past two years, most notably with the financial issues of Evergrande, which filed for bankruptcy in the U.S. recently. On Monday, Evergrande's stocks plummeted by 87% after trading resumed since 22nd March, 2022. Since then, the stocks have been struggling to go back up.
Rosengren noted the positive growth of ABB's e-mobility business globally, especially in China, and that the company is planning an initial public offering. He also highlighted the need for a green energy transition, which has been further emphasized in Europe due to the Russian invasion of Ukraine and resulting natural gas restrictions. He pointed out the importance of building up electrification infrastructure to support the industry, and acknowledged that ABB's e-mobility division had faced difficulties due to macroeconomic conditions and the need to focus on a more product-specific strategy.
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