They Flocked to China for Boom Times. Now They’re Thinking Twice.

A.H. Beard, a 123-year-old luxury mattress manufacturer based in Australia, started eyeing China around 2010. At the time, the family-owned company faced looming competition from low-cost, foreign-made mattresses in its home market. China, with its 1.4 billion consumers and a growing middle class with a taste for premium brands, seemed like a good place to expand.

The choice paid off.

A.H. Beard opened its first store there in 2013. Before the coronavirus pandemic, sales in the country were growing more than 30 percent a year. There are now 50 A.H. Beard stores across China, with plans to open 50 more. But like most foreign companies operating in China nowadays, A.H. Beard has started to think more carefully about its strategy.

Beijing’s strict Covid-19 policy has exacted a heavy toll on business. The company’s exports into China are no longer on the rise.

This month, Chinese officials announced that the economy grew at its slowest pace since the early days of the pandemic. Unemployment is high, the housing market is in crisis and nervous consumers — living under the constant threat of lockdowns and mass testing — are not spending.

Now, the once resilient Chinese economy is looking shaky, and the companies that flocked to the country to partake in boom times are being confronted by a sobering reality: flat growth in what was once seen as a reliable economic opportunity.

“I certainly don’t see China returning to the rates of growth that we had seen previously,” said Tony Pearson, chief executive of A.H. Beard.

So far, most companies are staying the course, but there is a steady whiff of caution that did not exist just a few years ago.

Geopolitical tensions and a U.S.-China trade war have unleashed punishing tariffs for some industries. Covid-19 has snarled the flow of goods, lifting the prices of almost everything and delaying shipments by months. China’s pandemic response of quarantines and lockdowns has kept customers at home and out of stores.

A.H. Beard opened its flagship store with a local partner in Shanghai almost 10 years ago. And like any high-end brand, it rolled out products with prices that defy belief. China became the best-selling market for its top-of-the-line $75,000 mattress.

Since then, the cost of shipping a container has jumped sixfold. The cost of mattress materials and components, such as latex and natural fibers, have increased significantly. Other worrying signs have emerged, including a housing slump. (New homes often mean new mattresses.)

Mr. Pearson said he is hoping that the Chinese Communist Party congress later this year will clarify “the trajectory for China” and imbue consumers with more confidence. “The economy still has growth potential,” he said. “But there’s always a degree of risk.”

After the 2008 financial crisis when the rest of the world retrenched, China emerged as an outlier and international businesses rushed in.

European luxury brands erected gleaming stores in China’s biggest cities, while U.S. food and consumer goods companies jostled for supermarket shelf space. German car manufacturers opened dealerships, and South Korean and Japanese chip firms courted Chinese electronics…