By Lewis Krauskopf
NEW YORK (Reuters) - Economic growth may be slowing in China, and fears of a credit crunch there may be rife, but the world's second-largest economy was a driving force for U.S. company profits in the last quarter.
Some of the biggest names in Corporate America, including Coca-Cola Co
Yum Brands Inc
"It is still a little surprising how strong China remains, given what you read," United Technologies' Chief Financial Officer Greg Hayes said in an interview in reference to the conglomerate's building systems businesses, which include elevators and climate control equipment.
The initial results this period could soothe concerns on Wall Street that a cooling off of China's booming economy will drag down results of U.S. corporations operating in the region. China's economy expanded 7.4 percent between January and March, its slowest pace in 18 months, and well below the turbo-charged double-digit growth rates that it has often experienced in the past 20 years.
But that growth is still far faster than in the United States, where the economy - which took a heavy blow from a deep winter freeze - is expected to have grown just 1.1 percent in the first quarter, according to the latest Reuters poll of economists.
And lower growth rates in China partly result from a push by Chinese authorities to rebalance the economy so that it is less reliant on export growth and more focused on domestic consumption. That is good for Western companies trying to sell into China.
"The economic growth remains favorable in China," said Tim Ghriskey, chief investment officer with Solaris Asset Management. "While that growth rate has slowed slightly there is still a lot of business being done, especially by larger companies, and U.S. companies are receiving their fair share of that business."
AUTO SALES STRONG
In an illustration of the climate in China, 776 large and small cap Chinese companies are expected by analysts to grow earnings by 14.6 percent over the next 12 months, and revenue by 9.1 percent, according to Thomson Reuters Starmine's smart estimates. That contrasts with 9 percent earnings growth on 4 percent higher revenue for U.S. companies in the S&P 500 over that period.
"If we see these Chinese companies are expecting these fantastic growth rates, there's no reason U.S. companies doing business in China should not expect similar growth rates," said Sri Raman, senior research analyst at Thomson Reuters.
Automaking is one industry benefiting from Chinese demand. GM's first-quarter sales rose 12.6 percent in China - a market that now provides four out of 10 of the company's sales - even as sales in the Americas weakened in the period. GM is due to report its earnings on Thursday.
Similarly, diversified industrial products maker Illinois Tool Works Inc
China has also been a bright spot for a variety of consumer product companies. Kimberly-Clark Corp
McDonald's said it planned this year to open about 300 new restaurants in the country, where same-restaurant sales rose 6.6 percent last quarter. In the United States, its sales slipped.
And clothing retailer Gap Inc
In China, "while overall economic growth may be slowing, from a consumption perspective, that's rising internally, so that's not surprising to me," said Oliver Pursche, president of Gary Goldberg Financial Services.
Diversified manufacturer United Technologies' sales rose 14 percent in China for its business providing climate control, security and other systems for commercial buildings. Sales of its Otis elevators division rose 16 percent in China, where orders soared about 25 percent.
To be sure, China has been a sore spot for some companies. IBM Corp's
And other U.S. companies with significant business in China, such as Apple Inc
(Additional reporting by Phil Wahba, Jilian Mincer and Caroline Valetkevitch in New York, James B. Kelleher in Chicago, and Lisa Baertlein in Los Angeles; Edited by Martin Howell)
