American companies are more reliant on China than at any time during the past decade as allegations of hacking and cyberspying threaten to disrupt business between the two nations.
The CHART OF THE DAY shows Intel Corp., Yum! Brands Inc. and 35 other companies in the Standard & Poor’s 500 Index get about 18 percent of sales from Asia’s biggest economy, the most since 2005, when Bloomberg began compiling financial filings from companies that disclosed any revenue breakdown from China. While warnings from the nation about potential retaliations have increased in the past three weeks, these stocks rose an average 4.7 percent, compared with a 3.5 percent gain in the S&P 500.
The performance shows that equity investors consider the political brinkmanship between the two governments not significant enough to drag down shares, said E. William Stone, chief investment strategist of PNC Wealth Management. Trade between the two countries last year topped $562 billion and only Canada did more commerce with the U.S. China is the largest U.S. creditor, holding $1.3 trillion in Treasury securities.
“We’re in a relationship, a very deep one,” Stone said in a June 6 phone interview from Philadelphia. His firm manages about $130 billion. “You want to believe that actually prevails in the long run despite the kind of rhetoric.”
The Chinese government has contacted banks in China as part of a review of their use of International Business Machines Corp. technology, people familiar with the matter said last month. The U.S. Justice Department charged five Chinese military officials May 19 for allegedly hacking into the computers of American companies and stealing trade secrets.
The nation’s state-run media stepped up criticism last week. Apple Inc., Microsoft Corp., Google Inc. and Facebook Inc. cooperated in a secret U.S. program to monitor China, said a commentary on the microblog of the People’s Daily newspaper. China Central Television, the national broadcaster, said a provincial government was told not to buy computers with Microsoft’s Windows 8.
Intel, the largest maker of computer chips, got 19 percent of its revenue from China last year, data compiled by Bloomberg show. Yum, owner the KFC and Pizza Hut chains, relied on China for more than 50 percent of its revenue. While IBM doesn’t break out sales figures by country, 14 percent of its 2013 revenue of $99.8 billion came from the Asia-Pacific region excluding Japan, the data show. Other U.S. companies getting more than 10 percent of their sales from China include Mead Johnson Nutrition Co., Apple and Boeing Co.