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Customers eat at a McDonald's opposite a KFC restaurant in the southern Chinese city of Shenzhen.

© Bobby Yip / Reuters/Bobby Yip/Reuters

China's official data aren't always helpful. But the earnings statements of foreign multinationals provide a good alternative reality check on the Chinese economy. Leaf through recent numbers from those with big businesses in the People's Republic, such as Yum Brands, Siemens or LVMH Moët Hennessy Louis Vuitton, and three trends emerge.

Consumer companies tell a tale of rising prices. Yum, the parent group of Kentucky Fried Chicken, is just one struggling to pass through rising costs to Chinese customers. Same-store sales rose 21 per cent in the fourth quarter, but food, wages and rent hikes helped drag down margins to 16 per cent, from 18 per cent a year earlier. Yum plans to raise prices again in 2012, after a small 2-per-cent increase in September. So much for inflation being under control.

Heavy industrials, meanwhile, convey slowing investment. Siemens, which supplies machinery to manufacturers, reported a 16-per-cent decline in new Chinese orders in the last quarter of 2011, measured year on year. Power company Eaton Corp. singled out China as one factor behind its own missed sales targets. Foreign suppliers feel the pinch early when manufacturers start running down stocks instead of increasing production.

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Then, there are the luxury firms. For them, life is great, showing that, even if the economy is slowing, the rich and powerful are doing fine. That's bad for China's rising wealth gap and its fight against corruption, both of which fuel social tensions that threaten steady growth. Richemont, which owns Cartier, and LVMH both enthused about Chinese demand in their quarterly statements. They are also the top brands for Chinese millionaires buying gifts, according to the Hurun report.

It's not all bleak. Richemont's sales in Europe, which rose 16 per cent year on year, were driven in part by Chinese tourists. They bought $7.2-billion (U.S.) of luxury goods abroad during the lunar New Year break, according to the World Luxury Association. Those don't officially count as imports – yet, if they did, they would almost balance the estimated $10-billion trade surplus for January. It's some comfort that China is consuming, even if not always at home.

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