Slower-than-expected economic growth in China could hurt some U.S. technology and industrial companies, although any near-term financial impact would be modest, Fitch Ratings said in a new report.
The rating agency noted that a number of U.S. companies in the technology sector and in the aerospace and defense, automotive, and diversified manufacturing industries have significant exposure to China, where they generate a major portion of their sales and revenue.
These companies include Honeywell International Inc., Caterpillar Inc., United Technologies Corp. and Boeing Co., as well as technology firms Texas Instruments Inc., Intel Corp. and Western Digital Corp.
"An accelerated slowdown in China would have a broader impact on diversified industrial and capital goods companies," Fitch said.
U.S. auto manufacturers Ford Motor Co. and General Motors Co. would also be affected by a decline in demand in China, the world's largest auto market, where U.S. carmakers have unconsolidated joint ventures that contribute substantially to annual cash flow.
Fitch had projected China's real GDP growth to slow to 6.5% in 2018 and 6.1% in 2019, from 6.9% in 2017. But actual growth that would be about 1% lower than these projections would not "profoundly impact" the U.S. economy or sales within the affected sectors over the near-to-intermediate term, according to Fitch.
The modest impact is partly due to drivers of demand, Fitch said. U.S. technology companies, in particular, have also increased diversification across end markets, boosting their credit profiles.
Over the longer term, however, increased competition in China could also influence revenue growth and market shares of U.S. companies, Fitch said.
