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Current totals: 280 Entries and 288 Comments |
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P.T. Black, a lifestyle research consultant in Shanghai, listed what he sees as "the eight most common misunderstandings about China" in an interesting column published in our sister publication AdAgeChina. The top item on his list was "China is America in the '50s (or Japan in the '80s, or Mexico in the '90s or ...)." Black argued: "Everybody loves a good historic analogy, but China is too big, too complex and too thoroughly integrated with the rest of the world. The country's consumer culture is leapfrogging its own unique path." That reminded me of some heated discussion at the US-China Global Brand Summit I was invited to attend last fall. An American consultant with quite a bit of China experience stated that China is America in the '90s, which doesn't sound so bad, especially considering the relatively slow growth in the U.S. in the past two decades. Still, the comment was challenged by a Chinese professor from Beijing University, who claimed that the time element is tricky in the comparative analysis of two nations. It makes better sense to compare snapshots of two countries at the same point in time. That argument is valid in the sense that China currently has so many characteristics that the U.S. didn't have in the '90s or '50s, such as the 384 million Internet users, and a 50 percent penetration rate of mobile phones. As Black rightly alluded, China's consumers are catching up with their peers in the West. From electronics to high fashion to luxury cars, the savvy and sophisticated Chinese wealthy are at the very forefront of global consumer trends. Chinese children are growing up watching Sesame Street, Harry Potter and American Idol, while their grandparents may still have a collection of Mao's Little Red Book. The landscape is just as complex and diverse in manufacturing. State-of-art factories and very dated technologies co-exist in peace, serving different sections of the vast spectrum of global consumers. No matter whether a Chinese company exports to America or Africa, making iPhones or soap boxes, as long as it makes money, it will continue to exist and contribute to the Chinese economy. That's why China is unique.
Over the past decade, Taiwan - one of the Four Asian Tigers - has seen its economy continue to expand, but real wages have gone the other direction. The plastics processing industry is among those that have suffered double-digit decline of inflation-adjusted wages. Taiwan's real GDP grew 17.5 percent in the past 10 years, after deducting inflation from the 29.4 percent nominal rate, according to government stats quoted by a recent report in the Taiwanese publication Business Weekly. However, real wages shrank 4.3 percent during the same time period. The plastics processing, machinery/equipment, and auto and auto parts manufacturing industries have seen double-digit deceases of real wages. The Business Weekly article, "Who stole my hard-earned money?", listed a number of reasons to blame, the top being globalization, especially outsourcing to the Chinese mainland and other lower-cost regions. Even more thought-provoking are Taiwanese readers' comments. Reader "KK" wrote: "...Taiwan corporations constantly focus on cost reduction measures such as outsourcing and offshore manufacturing... They only want to make more money and give no thoughts to the support they received from the people and the society in Taiwan when their businesses first started. There are no national boundaries for greedy businesspeople." [Translation] Reader "Jeff" disagreed: "Don't blame businesspeople. The global market has no national boundaries indeed. Businesses only need to abide by the laws and pay taxes. ... The big problem is what we have the government for. If the government offers no solution but to blame the macro environment, the individuals just have to do as they see fit." [Translation] All these sound a little Déjà vu to me. Don't we have the same dilemma here in the U.S.?
Where is the line drawn between a similar trademark and a confusingly similar trademark, the latter deemed an infringement? How does the Chinese government assess the "likelihood of confusion"? In a recent case, a small Chinese firm defended its trademark against disputes from a leading multinational automaker. Let's take a look at the visuals below. To the left is a trademark owned by Zhejiang Xunda Plastic & Mould Co. Ltd., side by side with the famous Mercedes-Benz emblem.  Xunda, a manufacturer of molds and injection molded auto and motorcycle parts in Taizhou, Zhejiang province, selected the trademark design created by a design firm in 2004, Taizhou Daily reported. During the public comment period of the trademark registration process in 2006, Mercedes-Benz filed a claim arguing that Xunda's trademark could confuse customers into thinking that they were buying products from Mercedes-Benz. According to Chinese trademark law, Xunda was ordered to cease the use of the trademark while the case was under review. So Xunda refrained from using the logo between 2006 and 2009, until the State Administration for Industry & Commerce recently ruled in favor of Xunda in a final judgment. "We never thought about mimicking an existing famous brand," Xunda Chairman Lin Huazhi told Taizhou Daily, "We have established our brand in our own circle, mostly motorcycles and electric bikes."
Lenovo is shutting down one of its two computer manufacturing plants in India, a country known for its IT sector and low-cost manufacturing. Why? According to PC World, the Chinese computer giant made the move due to declining market share in India. The company may expand the capacity at the facility at Pondicherry, which became part of Lenovo through its acquisition of IBM's PC business in 2005. To say the least, Lenovo overestimated its ability to expand in India. Although it seems logical that Chinese products would fit the Indian market at bargain prices, Chinese companies haven't found it easy to succeed in India for various reasons. In Lenovo's case, it has the advantage of local production, which should offer both lower-than-China cost and better responsiveness to the Indian market. Lenovo's India management also invested heavily on marketing and advertising in India. In 2008, Lenovo achieved its highest brand awareness outside China in India and aimed to become No. 1 in the market. Two years passed. Lenovo India has slipped from the third place in the market to the fifth. What didn't work? Some readers' comments from the Times of India, expressing disappointment in the quality of Lenovo laptops and its customer service, might shed some light. But if quality were a company-wide issue, how would we explain Lenovo's predominant success in the home court -- 30 percent market share, twice as much as the closest follower? We may need to look deeper into China and India's differences in consumer culture, user expectations and brand nationalism.
As the old Chinese saying goes, a hero is known in the times of misfortune (Luan Shi Chu Ying Xiong). China has, in the past year, passed several milestones while much of the rest of the world still struggles with economic recoveries. I compiled the following list of important facts about the latest economic trends in China and global power shift.
1. China's Gross Domestic Product (GDP) resumed double digit growth in the fourth quarter of 2009.
The country easily beat its 8 percent annual growth target - a goal deemed the minimum needed to create jobs and preserve social stability - and grew 8.7 percent for all of 2009, instilling confidence in industries and consumers.
2. China has officially become the world's largest auto market.
Auto sales reached 12.64 million units in 2009, a nearly 50 percent increase over 2008. For auto makers and suppliers, the next four years may not witness the same neck-breaking growth rate, but China will continue to dominate the emerging economies and outstrip mature markets.
3. For the first time since 1987, China's rural consumption growth outpaced urban consumption growth in 2009.
This is largely due to the subsidies and trade-in programs for purchases of cars, appliances and electronics in the vast rural market. These product categories use a good amount of plastic parts and components, helping the plastics industry offset the sharp decline of exports.
Stephan Greif, Demag Vice President-China and CEO of Demag Ningbo, compared the year of 2009 with the experience of bungee jumping. "The first six months was free fall and the second six months was booming," he wrote in the company's latest monthly newsletter. Although the overall annual performance ended up being "quite normal," it took some extraordinary effort to make it happen. Greif said it wasn't easy to balance production capacity, inventory and cash flow. He said Demag Ningbo strengthened its capacity in the past year and is launching four new machine models (420-ton, 500-ton, 650-ton, and 800-ton) in 2010, the Year of Tiger. Greif also emphasized that low-end production will soon come to an end in China, after discovering that the average salary in Southeast Asia is lower than China. "Medium and high-tech products are the future!" he noted. After reading Greif's note, I fully agree that China's cost hike will continue, especially as experts warning about inflation crawling up in 2010. Meantime, pressure from the outside for China to inflate its currency also keeps intensifying. All these factors will inevitably lessen China's cost advantage, compared to other developing countries. On the flip side, it could also mean that Chinese consumers and businesses now have stronger purchasing power to shop for higher-end products. Obviously, this growing market section is sought after by both multinational firms and relatively more advanced local manufacturers. Therefore, the potential is growing, so is the competition.
PPG Industries has recently been named as one of the top 100 global enterprises that contribute to China's economic development by China Enterprise News and the China Enterprise CSR Research Center. Cathy Yan, general manager, government affairs and business development, PPG Asia/Pacific, noted in a Jan-19 news release: "Even the global economic downturn last year did not stop our growth in this region." She said the company made two important investments in 2009 - one is the Application Support Center (ASC) in Tianjin for the aerospace business, and the other is PPG's first resin plant in China." The resin plant in Zhangjiagang, Jiangsu province, will be a "model plant" in terms of its environmental features, the company said, incorporating PPG's "green" building materials. The Zhangjiagang plant is scheduled to begin operation in early 2011, primarily producing water-based electrodeposition resins.
 Yan at the award ceremony. (Photo by PPG)
A big fire at a Taiwanese-owned molding facility in Shenzhen, Guangdong province may have been caused by overheated injection presses. According to local media reports and government announcements, shortly after 3pm on Jan 16, a fire was sparked in a four-story building, where more than 400 employees were at work. The blaze quickly spread in the building, owned by Nishoku Mold Industry Co. Ltd., which makes injection molded cell phone housings. Alarmed by the smoke, thousands of workers at nearby factories were evacuated. The blaze was brought under control within four hours by at least ten fire trucks. Shenzhen officials said initial investigation pointed to overheated injection machines igniting inflammatory chemicals as a likely cause of the fire. However, there were also accounts by witnesses quoted in media reports, claiming short-circuited ultrasonic equipment sparked the flame. By Jan 18, six of the 21 injured workers remained hospitalized.
The overall manufacturing sector apparently regained some ground in December in the U.S. and China, but the plastics processing industry continued to contract. U.S.The American manufacturing sector expanded in December for the fifth consecutive month, according to a Jan.-4 report from the Institute for Supply Management (ISM). The Purchasing Managers Index (PMI), which gauges overall economic activity at factories, climbed to 55.9 percent, the highest since April 2006. However, plastics and rubber products was among the seven industries still in decline. Factories reported decreases in new orders, production and employment during December. Customers' inventories were lower, and manufacturers' inventories went up. The plastics and rubber industry also reported paying increased prices. On the flip side, new export orders of plastic and rubber products rose. ChinaThe China Federation of Logistics & Purchasing (CFLP) said its PMI index for December rose to 56.6 percent, gaining 1.4 percentage points from the previous month. According to a Jan.-1 report, however, the category of "chemical fiber, rubber and plastic products" registered a below-50-percent PMI. The PMI readings for production and supplier deliveries were 47 and 49, the lowest since February 2009. New orders also declined. A PMI reading above 50 percent indicates that the manufacturing economy is generally expanding.
Sumitomo Chemical has established a 80-20 joint venture with Dalian Jingang Group Co. Ltd. to manufacture high-performance greenhouse films and other products. The new company, Dalian Sumika Jingang Chemicals Co. Ltd., will construct new production facilities in the Dalian Economic and Technological Development Zone of Liaoning province, Sumitomo announced last month in a news release. The target annual capacity is 4,000 metric tons of plastic films. Dalian Sumika Jingang was registered with 515 million yuan in paid-in capital.
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Since the launch of our Plastics News China eWeekly newsletter and related Web site in June 2005, I've been receiving e-mails and phone calls from readers who would like to discuss news events and industry trends with me. This blog is to provide a platform to facilitate such communication. I invite you to come here often, read about the latest happenings and discuss them with me as well as with industry friends all across the globe. I welcome your comments and opinions.