Corning Watch: Company’s future tied closely with China

Corning Inc. has been investing in China for more than 30 years.

For the Fortune 500 company, there was really no alternative. It has been obvious for a while that China will, sooner or later, become the world’s largest economy. For the region’s largest employer, staying out of China would have been a self-imposed death sentence.

So today, Corning Inc. manufactures in China such products as optical fiber and cable, emission control systems, flat-panel displays, and life sciences equipment.

Corning doesn’t break down how much of its profits come from China. But with the Asian economic leader tottering somewhere between collapse and recession, Corning’s profits there are likely to decline in the short term.

The stock market’s sharp pullback, which began in Asia and spread to the U.S., was sparked largely by fear of what’s happening in China.

Corning Inc. is not the only U.S. company that has invested heavily in the Chinese economy. If that economy fails, it will be bad news for many major U.S. corporations, their employees, and the entire U.S. economy.

Corning likely has expansion plans in China under consideration. The chaos in the Chinese economy could derail or delay some of those plans.

Part of the problem is that the Chinese government has experimented with a variety of economic tactics that have not worked very well.

One was financial incentives to boost the sale of flat-panel televisions. Another was the devaluation of its currency. Then came a lowering of interest rates.

It looks from a great distance like the Chinese government has no coherent plan for the nation’s economy. The lack of such a plan creates great uncertainty among investors, which helped cause the Chinese stock market to lose 22 percent in a little over a week.

Corning Inc. stock took a beating last week as the American stock market tumbled.

For Corning Inc., however, this latest market crisis is not the same kind of situation it faced in 2001, when the existence of the company was in jeopardy.

There will be some pain for Corning Inc., its investors and its employees as a result of this new market turmoil. The company, however, is more diversified today than it was in 2001. It has a stronger balance sheet.

More importantly, the current economic weakness is not confined primarily to the products on which Corning Inc. relies for its profits.

The Corning Watch column offers analysis of news involving Corning Inc. Contact Larry Wilson in care of Star-Gazette, P.O. Box 285, Elmira, NY 14902; or by email at ldwilson2278@gmail.com. Corning Watch appears Sundays.