- Title: WPP head says China market toughest in three decades
- Date: 29th September 2016
- Summary: SHANGHAI, CHINA (SEPTEMBER 29, 2016) (REUTERS) HEAD OF WPP, MARTIN SORRELL TALKING TO JOURNALIST (SOUNDBITE) (English) HEAD OF WPP, MARTIN SORRELL, SAYING: "You are getting some positives. It's not all doom and gloom by any means. It's the second largest economy in the world. It's now all about 11 trillion dollars versus US 16 or 17 trillion. So it's very significant. But it’s not in my view growing at 6.5 percent." MARTIN SORRELL TALKING TO JOURNALIST SORRELL'S HANDS ON KNEE (SOUNDBITE) (English) HEAD OF WPP, MARTIN SORRELL, SAYING: "Some of these trophy assets that are being bought at trophy asset prices. It's difficult to see how returns will be earned or significant returns even over a very long term because some of the prices are being paid are very very high." REFLECTIONS OF MARTIN TALKING TO JOURNALIST (SOUNDBITE) (English) HEAD OF WPP, MARTIN SORRELL, SAYING: "You know with the burning platform you can do things that in more normal circumstances you find difficult to do. But, you know, all that money coming into the sport obviously creates some green eyes." HEAD OF WPP, MARTIN SORRELL TALKING TO JOURNALIST MARTIN SORRELL
- Embargoed: 14th October 2016 16:17
- Keywords: WPP CEO Martin Sorrell China market toughest three decades
- Location: SHANGHAI, CHINA
- City: SHANGHAI, CHINA
- Country: China
- Topics: Economic Events
- Reuters ID: LVA00151ME4JX
- Aspect Ratio: 16:9
- Story Text: China's huge market, a magnet for drug makers to Hollywood studios, is the most challenging it's been for three decades, the head of global advertising giant WPP Plc Martin Sorrell said in an interview on Thursday (Sept 30).
The world's largest advertising firm has seen its own growth in China stymied with revenues flat in the first six months of the year, Sorrell told Reuters at the firm's Shanghai office, as clients tighten belts amid an economic slowdown.
It's the first time for a long time we've seen it like this, Sorrell said, adding the firm which employs around 15,000 people in China was predicting a boost in the second half of the year.
With China's economic growth at its slowest in a quarter of a century, investors and global business leaders are looking for any clues about the health of the economy - especially areas fuelled by consumer spending and services that are meant to take the helm from flagging manufacturing and exports.
Sorrell said even these areas were showing weakness, although longer-term he did remain an "unabashed raging bull".
"You are getting some positives. It's not all doom and gloom by any means. It's the second largest economy in the world. It's now all about 11 trillion dollars versus US 16 or 17 trillion. So it's very significant. But it's not in my view growing at 6.5 percent," he said.
This slowdown has hit multinational firms harder than domestic rivals, who have been able to adapt products faster to steal market share from international brands.
Last year, domestic brands ate into the market share of foreign products for the fourth year in a row, according to data from Bain & Company and Kantar Worldpanel. This included goods ranging from fizzy drinks to toilet paper.
Chinese firms are also being increasingly aggressive on the world stage, creating another challenge for overseas rivals but also fuelling debt risk at home as they take on more leverage to fund their buying spree.
With a weakened yuan, Chinese outbound M&A activity has more than doubled in the past two years, hitting a record $120 billion in total deal value by June, according to Thomson Reuters data, a spree which has raised question over some of the firms' ability to pay up.
"Some of these trophy assets that are being bought at trophy asset prices. It's difficult to see how returns will be earned or significant returns even over a very long term because some of the prices are being paid are very very high," said Sorrell, commenting on a recent spate of acquisitions by Chinese buyers into the global soccer market, which has seen around $3 billion splurged since the end of 2015.
Chinese retailer Suning Commerce Group Co. Ltd., developer Dalian Wanda and other more obscure Chinese groups have led the charge in soccer deals, helping pump even money into the already cash-flush market.
Sorrell said this influx of money was partly to blame for the furore hitting English football with the sacking of national team manager Sam Allardyce for seeking a lucrative sideline job.
Britain's Daily Telegraph said this week it had hundreds of pages of transcripts from an undercover meeting in which 'Big Sam' had discussed a deal worth 400,000 pounds ($520,000) to represent a Far East firm seeking advice on the transfer market.
Huge sums paid for transfer, television rights and global soccer events also stoked a major bribery scandal at the sport's global governing body FIFA that saw a wholesale shake up of the body this year, said Sorrell.
"You know with the burning platform you can do things that in more normal circumstances you find difficult to do. But, you know, all that money coming into the sport obviously creates some green eyes," he added. - Copyright Holder: REUTERS
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