By: Steve Toloken
November 8, 2013
FOSHAN, CHINA — Rising costs and economic challenges caused China’s plastics processing industry to see its growth slow to about 5 percent in the first nine months of the year, prompting the head of the country’s largest plastics association to make a forceful call for companies to innovate and adopt new technology.
That estimated 5 percent increase in manufacturing output of plastics products is down from 8.9 percent in 2012, which itself was well off the 20+ percent growth in 2011 and the previous several boom years, said Qian Guijing, president of the Beijing-based China Plastics Processing Industry Association.
China’s plastics industry will have to get used to a period of slower growth, he suggested, although even 5 percent would still beat last year’s 3 percent increase in worldwide plastics production.
“A lot of people have this fantasy that after the financial crisis, we can have another era of high growth,” said Qian, in a speech at the 2013 Plastics Industry New Materials, New Processing and New Equipment Industry Summit, held Nov. 8-9 in Foshan. “We have to adjust and adapt to this period.”
By adjust, Qian said he means the industry needs to change from an investment-based model focused on competing on lower costs, to one based on better use of technology, such as energy-saving equipment, advanced foamed plastics to lightweight parts for cars and other industries, high-barrier films, micromolding and 3-D printing.
“In the past we relied on enlarging the investments but this method cannot continue in the future,” he said. “We can never exaggerate the significant meaning these technologies have for our industry.”
He said the processing industry’s challenges are well catalogued, including rising costs from higher wages in China, excess capacity that hurts profit margins, tougher environmental regulations and troubles in the world economy since the 2008 financial crisis.
“The financial crisis had a tremendous impact on us,” he said. “We have slowed down the speed of our development.”
That 5 percent estimate of growth through September is down from about an 8 percent growth that CPPIA in September had estimated for the first half of the year. It could indicate a poor third quarter, or it could reflect difficulty in getting accurate data in China.
Still, in an interview after his speech, Qian said the economic situation seems to be improving in the fourth quarter, and he hoped that industry growth in production could hit 7 percent for the full year.
There have been some recent signs of a pickup in China’s broader manufacturing economy. The widely watched HSBC Purchasing Managers Index for October said output in Chinese factories increased at the strongest rate in seven months, although it cautioned it was a slight increase.
Another industry official at the conference, Lin Jian of the Guangdong Light Industrial Association, said China’s private sector continues to suffer from difficulty getting bank loans. It’s easier for state-owned companies to obtain bank loans, he said in an interview on the sidelines of the conference.
CPPIA’s Qian contrasted the processing industry with China’s plastics equipment manufacturers, which he said have a better global position because of improving technology and a cost advantage, relative to other major machinery manufacturing countries. The technology gap between Chinese and other major producers is shrinking, he believes.
“We can say that we are not that far behind other major countries in our machinery technology,” he said.