In many ways, 1989 was a very special year in history.
Plastics News was launched in Akron. Half a world away, China was trying to carry on economic reforms while clamping down political unrest.
In that year, China produced 3.5 million tons of plastics products, according to archived data. That number grew more than 17 times over the next 25 years, reaching 61.8 million tons in 2013. That translates to an average annual growth rate of 12 percent, slightly higher than China’s GDP growth of the same period.
It took China less than four decades to transition itself from an isolated, Cultural Revolution-wracked state to the world’s second largest economy only behind the U.S. As an important part of the nation’s manufacturing sector, its plastics industry has become the world’s number one producer of plastics products as well as plastics machinery. It’s also the world’s largest consumer of plastic resin and processed plastic products.
Back in 1989, molders in China made basic plastic consumer products. Today, they produce plastic parts that go into everything from iPhones to spaceships.
Riding the economic boom, many companies and entrepreneurs quickly built up business empires in a relative short period of time.
China’s leading domestic plastic pipe manufacturer Lesso Group (China Liansu) was founded in 1996 in Shunde, Guangdong province. They expanded the company over the years to 13 billion yuan ($2.09 billion) in sales, with more than two dozen productions bases in China and North America. Its founder, 52-year-old Wong Luen Hei, and his family, have accumulated 7.4 billion yuan ($1.19 billion) in personal wealth and are ranked 121st in China’s latest Rich List.
The rise of China in the global manufacturing arena has created both opportunities and challenges for Western companies.
During the first decade of this century, American businesses increasingly leveraged China’s low costs by moving manufacturing to or sourcing products from there. It helped them reduce cost and grow bottom line. Suppliers followed their customers to open offices and build factories in China.
Foreign direct investment fueled China’s assurgency as the world’s manufacturing powerhouse. But outsourcing certainly had side effects — the reduction of labor-intensive manufacturing in the U.S.
The world kept evolving. As China’s costs rose, some manufacturers shifted production away from China, either to lower cost regions or closer to where the end customers are.
Other companies repositioned themselves to focus on selling into the Chinese market and to domestic customers, as China’s rapid socioeconomic shifts created a growing appetite for better products.
China is not just a growing market, but also a rising competitor. With the nation’s endeavors to transition from a low-cost producer to a high value economy, Chinese companies are becoming more sophisticated and more active in developed markets through direct investments and acquisitions.
Flipping the pages back to 1989, in Wenling, Zhejiang province, 16 families took the lead and ventured into the plastics business, as described in the book “Zhejiang Phenomenon: Industrial Clusters and Regional Economic Growth.” These entrepreneurs each purchased one to four injection molding machines from Ningbo and started making simple plastic items such as cutting boards and colanders from their house. Fellow villagers followed suit and the trend spread to nearby towns.
By 1993, half of the local residents were engaged in plastics molding. Wenling became the second largest production hub of plastics consumer products in China. One of the companies there was Taizhou Fuling Plastics Co. Ltd.
Some 22 years later, Fuling is investing more than $21 million to set up a highly automated factory in the U.S. and creating 75 jobs in Lehigh County, Pa. Interestingly enough, back in China, Fuling has reduced its headcount by 400 over the past five years by deploying more automation equipment. During the same period, the company managed to double three key parameters; total output value, per capita output value and average worker salary, according to Chinese media reports.
Fuling’s story shows that the world really is flattening. It’s also becoming more connected and interdependent than ever.
In another 25 years, will China become the world’s largest economy as some economists forecast? How will you fit China into your 2039 global business strategy? No matter what you do, keep up with China’s fast changes.