If you watched Ted Koppel's "The People's Republic of Capitalism" TV series on the Discovery Channel, you'd have heard of Chongqing, a booming industrial hub in southwestern China with substantial automotive and motorcycle production.

Maybe that's why the China Plastics Processing Industry Association is organizing the first annual meeting of its Sustainability Committee in Chongqing with a clear focus on the sustainable use of plastics in the auto industry.

The Oct.22-23 forum will feature speakers from the government, the industry and trade groups. It's interesting that three of the four industry speakers are from American companies: resin supplier Ticona, additives producer Albemarle, and automaker Ford Motor Co. In fact, Albemarle was one of the 10 founding members of CPPIA's sustainability committee, suggesting that U.S. firms are taking an initiative in promoting sustainable growth in China's plastics industry.

Details about the conference can be found here, in Chinese only. Basic info is also in the Plastics News Calendar.

Plastics News Asia Bureau Chief Steve Toloken will be covering the conference from on the ground.

Back in February, Plastics News reported on a major fire that killed 15 employees of a plastics recycling company in Shenzhen, Guangdong. [story link]

On Sept. 28, authorities finally concluded the investigation and announced that government employees were involved and punished.

The Feb. 27 tragedy was caused by an "unlawful company not fulfilling safety measures [and] government and law enforcement officials' delinquency and misconduct," the Xinhua Agency quoted a government spokesman as saying.

Nine people, including three fire department employees and one official from the Environmental Protection Bureau, have been arrested and prosecuted. The charges include offering and accepting bribes. Seven other local government employees were also found guilty in the investigation and received "administrative disciplinary measures."

The company, Longfei, has been fined 2.6 million yuan.

Right after the Feb. 27 blaze, the Shenzhen government told the press that it would start a citywide inspection of workplace safety measures. However, on Sept. 26, a short-circuit caused another fire in Shenzhen, this time at the components warehouse of Taiwan-invested Jinshun Plastics Products Co. Fortunately, Xinhua said nobody was injured in the fire.

On the same day, a plastic toy factory in Foshan, Guangdong, reported a fire in the plastic recycling station. The affected area reached 450 square meters, Guangzhou Daily said.

In my opinion, the root of factory fire hazards in China is the same as tainted food: the pairing of irresponsible businesses with a lax/corrupt regulatory system.

I was asked by an American friend whether the tainted milk scandal will inspire Chinese businesses to pursue better quality. I'm not sure as to what exactly it will take to awaken businesses' conscience and correct the system. If toys coated with lead-paint weren't enough, will a milk/food scare do it? My fingers are crossed.

Apple Inc. picked plastic instead of metal for the iPhone 3G's casing, but the trend seems to be reversing. The company is switching from plastic to a "very thin aluminum casing" for its new MacBook laptop, according to CNET.

Apple is not alone. Lenovo makes magnesium aluminum alloy casings for its IdeaPad notebooks, and the new luxury line called "Lamborghini VX3" from Taiwan's Asus primarily uses magnesium as well as some leather [not sure if it's genuine or synthetic]. Click here for the report with nice art.

The metal construction certainly appeals to consumers with an anti-plastic attitude and/or retro tastes. Manufacturers also claim that aluminum casings improve the recycling and environmental credentials.

Production is also a factor. Some laptop brands are switching to metal casings out of fear of short supplies of in-mold roller (IMR) treated plastic casing, a recent Chinese article cited International Data Corp. as saying. But I didn't find such a statement on IDG's English-language Web site.

If you are interested in learning about the top suppliers of electronic product cases, here is a report from VerticalEdge Ltd. Just the executive summary contains a good amount of information, such as:

As for the [laptop] case, the plastic cases are mainly supplied by Ju Teng International Holdings Ltd. and Foxconn Technology Group as well as some relatively small companies, including Everskill Technology Co., Ltd., Huan Hsin Holdings Co., Ltd. and Shengmei Precision Industrial (Kunshan) Co. Ltd. The metal cases are mainly supplied by Foxconn Technology Co. Ltd., Catcher Technology Co., Ltd. and Chongqing Huafu Industry Co.,Ltd.

Background link: my blog item iPhone's plastic casing.

The ripple effects of economic crisis are spreading among countries on multiple levels and through interactive channels.

Chinese plastic processors, losing orders from overseas, are buying less resin and stocking smaller inventories. Japan, which sells 68 percent of its resin to China, has seen the export to China tank 45 percent during the first three quarters.

PVC producer Tosoh Corp. has cut its resin production by 15 percent since September, for the first time in a decade. Tosoh said demand from China has dropped sharply. Korean firm SK Energy Co. also told the Wall Street Journal that the company saw a 35 percent dive of petrochemical products sold to China.

There's no doubt that Western suppliers are tightening their boot straps.

Note that China's export category -- processed products -- are less value-added and profitable than the equipment and materials it imports from the West. I wonder which side -- the developing countries that manufacture low-end products, or the developed countries that supply advanced equipment, materials, technology and sometimes branding -- suffers less from reduced international trade.

What I'm certain about is that the global downturn is costing more jobs in China than anywhere else. Local governments used to support labor-intensive export factories running on razor-thin profits, just to maintain employment. Now even that is becoming history.

What is ahead of us all?

Mr. Hu Yaoming, a veteran in the toy importing business in Los Angeles, told Sing Tao News that imports from China are rapidly shrinking due to difficult market conditions. He also noted that cultural differences can be a market-entry barrier.

Chinese toys still make up 80 percent of the toys being sold in the U.S. But American consumers are buying less in general, pressured by the economic downtown. Some customers are discouraged from purchasing made-in-China toys because of the lead paint scandals last summer.

Importers like Hu are also trying to hold smaller inventories, because new regulations on lead and phthalates will come into effect Feb. 14, 2009, and Aug. 14, 2009. "Today's qualified products will become illegal tomorrow," he said.

Hu pointed out that American consumers have different tastes than their Chinese counterparts. Toy weapons, for instance, sell very well in China but can turn off American parents.

On the flip side, he noted that there's great market potential for electronic toys from China. Lower cost countries like Vietnam can offer cheaper stuffed animals than China, but China has unique advantages on electronic toys, thanks to the strong electronics sector in China.

While governments in the West scramble to nationalize financial institutions and inject money into the ailing economy, Beijing has finally decided to make its own move to protect its export sector, the engine of China's growth for the past decade.

Effective November 1, 2008, China will raise export tax rebates for 3,486 items. The rate for "processed plastic products" will go up four percentage points to 9 percent, and the struggling toy industry will enjoy a 14 percent tax rebate. Click here for the official announcement on the Web site of the Ministry of Finance.

The export tax rebate for plastic products was cut from 11 percent to 6 percent July 1, 2007. Since that time, the global economic slowdown, as well as domestic labor and environmental regulations, has put Chinese exporters under tremendous pressure.

Will the tax policy be able to rescue China's export business? I doubt it, as the decline of global demand poses a more grave challenge to China than cost structures.

Take the toy industry for example. China makes 90 percent of the world's toys. I don't have the hard numbers, but I wouldn't be surprised if the 2009 global demand ends up to be less than what China made and sold in 2007. It is hardly possible for China to keep its toy factories -- many of which have added capacity in the past few years -- running in a smaller global market. Therefore, there simply won't be enough orders to sustain all of the players. For those that can still secure orders, then yes, the tax rebate increase will certainly help with their bottom line. But the overall industry will not be able to escape the brutal restructuring.

China's ban of ultrathin plastic bags and free-of-charge shopping bags is marching into its fifth month of enforcement, and well-established bag makers are finding themselves in a predicament between the well-meant ban and underground bag manufacturers.

The ban's aim is to phase out ultrathin plastic bags, commonly provided by farmers markets and street vendors, because they tend to end up as litter due to their low cost and lack of durability. The ban also went one step further and asked all retailers to charge for plastic shopping bags that meet thickness requirements. Officials also believe the ban will push out of business underground bag makers, the main source of ultrathin bags.

Unfortunately, the results have gone astray of the ban's intentions. On one side, stores have been more than willing to gain extra revenue by charging for plastic bags, which has lead to a sharp decline in quality shopping bags. And on the other side, farmers markets and street vendors are ignoring the ban entirely and continue to use ultrathin, disposable plastic bags.

At an industry conference in Beijing earlier this month, a dozen leading bag manufacturers that make quality shopping bags complained that they've seen company sales plunge 40 percent, while unlicensed, underground bag businesses are thriving. A report from the Chongqing Business News said officials pledged stricter enforcement of the ban next year. But few details of how that will be achieved remain untouched.

Besides underground bag makers, producers and distributors of nonwoven bags -- marketed as eco-friendly -- have also stayed busy. But now authorities are telling consumers that nonwoven bags are made of nondegradable plastics and are "not really eco-friendly." The government plans to announce regulations for nonwoven bags in 2009.

A consultant from Platts said China soon will become the largest buyer of polyolefins and will have more say on resin pricing. Mr. Wen Longchuan told the audience at the recent International Synthetic Resin Conference 2008 in Yuyao, Zhejiang province, that China will consume 20 percent of world's polyolefins by 2012. Wen projected that China will import 3 million metric tons of polyethylene and 4.5 million metric tons of polypropylene in 2012.

Being the biggest resin buyer, China will have enough bargaining power to set the pricing for global markets. The Chinese currency Renminbi or yuan will also become an important denomination for resin prices.

A complete script of Wen's speech in Chinese is available here.

During economic hardships, the word "value" sounds more important than ever. Whether a business can survive such tough times has everything to do with its ability to create value.

A report from McKinsey & Co. examined North American auto suppliers' business conditions and whether they can create value. The findings, in short, suggest that over the next five years, North American auto suppliers could potentially create value across 60 to 70 percent of a vehicle's content, in three segments: innovative products; those that are consolidated with high barriers to entry; or those that that provide "early-mover" cost benefits.

The report's authors also advise North American suppliers to stay away from categories like: products that use mature technologies requiring labor-intensive production processes (for instance, transmissions); have low entry barriers (weather strips) or minimal capital expenditure requirements (functional plastics); and can be shipped long distances without adversely affecting an OEM's assembly schedules (antennas). What these products have in common is that OEMs well understand such products' cost structure and therefore have been able to reduce prices significantly.

Even products that some North American suppliers deem safe because of high shipping costs can be challenging, such as suspension modules, the study says.

The financial and economic crisis in the U.S. spread faster than some expected and is denting China's economy in many ways.

The twice-yearly China Import and Export Fair in Guangzhou is an important barometer of China's exports. The most recent fair, held earlier this month, witnessed a 10 percent drop in trade volume. According to the Xinhua Agency, orders from the U.S. posted the biggest decline: more than 30 percent from last year.

China's State Council decided over the weekend to stimulate exports in the fourth quarter by raising the export tax rebate for "labor-intensive products such as garments and textiles, as well as mechanical and electrical products with high added value."

China's largest appliance maker, Haier, told a Guangzhou newspaper that the company's export of refrigerators, washers and dryers dipped 10 percent in the first nine months. The company also saw red for the first time in its export division of refrigerators, washers and dryers. The company has been canceling orders that are likely to be unprofitable, such as refrigerators.

The global economic slowdown has also flattened commodities prices. In turn, it affects Chinese recyclers, which adjust prices according to futures. News reports from across China show that many recyclers have closed their doors, in fear of a further downward trend.

Would you like a martini in a plastic cup? Apparently authorities have ordered the Star Bar & Grill on George Street in Sydney to serve drinks in plastic cups after 11:30 p.m. to prevent injuries from violent behaviors. Last August, a man suffered serious head injuries after being struck with a schooner glass. In December 2007, authorities launched a trial involving the use of plastic cups after 11 p.m. on weekends and a 3 a.m. lockout. The Star Bar didn't participate in the trial. But another pub, Scruffy Murphy's on Goulburn Street, which has been using plastic stemware, said: "[We've had] not one complaint about the plastic. It holds the beer well, so it's fine." (Source: Sydney Morning Herald)

A plastics factory in China has been ordered to cease production for causing pollution -- a bad mix of coal smoke and toxic gas from burning plastic. For some reason, Hubei Hanyang Shi Lake Plastics Products Processing Factory decided to change the heating mechanism for its extrusion equipment. Instead of electricity, the company used bituminous coal to heat up resin. (Source: Hubei Daily)

The first seven months of this year saw radical changes in the Chinese toy exporting business. The number of companies that had actual overseas sales plunged 52 percent to 3,507, according to one of the latest reports from the China Customs.

Most of the companies that have left the market were small enterprises with annual sales less than US$100,000. Stats show that 3,631 of such firms have closed their export business.

I actually believe it's a wonderful thing that small firms no longer dominate China's toy exporting business. The ones that have remained in the market usually have better margins, cash flow and are more adaptable to market changes.

I suppose the bigger companies also have better quality control, technologies and brand value. This year, more than 40 countries and regions have released new standards on imported toys, challenging the lower-end of the Chinese toy making industry.

The massive closedown of small exporters also has lead to the dominance of foreign investment and state ownership in the industry, a phenomenon rarely seen in China's manufacturing sectors. Domestic private ownership usually takes a more important role than state ownership, such as in the plastics processing industry, which overlaps the toy industry.

The Malaysian Plastics Manufacturers Association (MPMA) was quoted in a New Strait Times report (in English) as saying that the industry remains robust and sales increased 8.3 percent in the first half of this year. Exports, in particular, rose by 18 percent.

Lim Kok Boon, the president of MPMA, said the industry was expected to benefit from stable raw material prices and an improving supply situation of resin.

MPMA's executive director ST Giam noted in a recent announcement that Malaysia cut import duties August 30 for polyethylene and polypropylene resins from 25 percent to 20 percent; polystyrene and PVC from 15 percent to 10 percent; and for plastic finished products from 25-30 percent to 20 percent. But the prevailing import duties under the ASEAN Free Trade Agreement remain unchanged at 5 percent.

MPMA will host its fourth International Plastic Conference Nov. 4-5 in Kuala Lumpur.

British gentlemen Rupert Hoogewerf quit his accountant job in Shanghai in 1999 and created the "China Rich List" with Forbes. He later struck out on his own [actually Forbes dropped him first] and has since been churning out his own version of rich lists in the popular "Hurun Report" [Hu Run is his Chinese name] magazine.

His latest product, the 2008 China Rich List (click to see the English version, which unfortunately has some translation errors compared to the original Chinese list), came out earlier this month. I ran a search for "plastic/resin" in this ranking of the 1,000 wealthiest in China and came up with my list of China's Richest Plastics Businesspeople.

Some of the company and individual names may look familiar, as they have appeared in Plastics News.

Interestingly, Kingfa is the only company that appeared twice in my list. And Mr. Song Ziming of Kingfa, 40 years of age, is also the youngest in my list.

I also found it thought-provoking that, out of the 35 provinces in China, half of the richest plastics people are from Zhejiang province. With a unique regional culture/tradition centered on business and investment, Zhejiang undoubtedly houses many of China's most diligent, ambitious and shrewd entrepreneurs. Now you know where to visit on your next business trip to China, maybe.

As China exports fewer processed plastics products to America in response to the slipping U.S. economy, Thailand is seeing a slowdown in resin demand from China.

Bangkok-based KASIKORN Research Center pointed out that Thailand's exports to China only grew 1.4 percent in August, and many product categories are even shrinking, the China News Agency reported.

Thailand said that China is importing less chemical products, circuits and refined oil, all important feedstocks for Chinese industries. Resin export also has lost momentum.

KASIKORN noted that China is vital for the regional growth in Asia. China is Thailand's third largest export market, after Japan and the U.S.

It seems to me that, compared to during a global boom, people actually get a stronger message during worldwide downturns on how countries and regional markets are closely interwoven in a globalized economy.

In a recent report released by Beijing-based China Industrial Information Issuing Center, Chinese plastics processors, at least the largest ones, still produce decent margins, compared to other manufacturing sectors.

According to the study, which analyzed the 500 largest manufacturing companies in China, the plastics processing industry is the third most profitable (11.62 percent), only behind the tobacco industry (17.3 percent) and the beverage industry (15.03 percent).

Average margins register at 2.81 percent for telecommunications equipment, 4.77 percent for electrical machinery, 6.93 percent for transportation equipment and 7.38 percent for steel.

The industry giants' performance certainly doesn't represent the entire market. The Chinese plastics processing industry, like its U.S. counterpart, consists mostly of small and medium-sized enterprises.

The 2007 average margin of China's 500 largest manufacturers was 6.51 percent, almost one percentage point higher than a year ago.

The company at the bottom of the list of China's 500 largest manufacturers reported 2007 sales of 5.4 billion yuan (about US$789 million).

Leading Chinese compounder Guangzhou Kingfa Sci & Tech Co. Ltd. has officially acquired a special engineering resin maker Mianyang Dongfang Special Engineering Plastics Co.

The deal was priced at less than 300 million yuan. No further details are available.

Kingfa has achieved rapid organic growth in the past three years, increasing sales by more than 30 percent annually. The October 1 acquisition marks the company's new expansion strategies as well as its determination of entering the market of specialized engineering resin.

Dongfang was founded in August 2003 with a registered capital of 60 million yuan. The company is currently the largest producer of anti-corrosion high density polyethylene that is used in buried steel pipelines and claims annual capacity of 32,000 metric tons, according to Kingfa's announcement.

Dongfang's major customers include refiner giants like Petro China, China Petroleum & Chemical Corp (Sinopec) and China National Offshore Oil Corp (CNOOC).

As of the end of August, the Mianyang, Sichuan province-based company realized sales and net profit of 315 million yuan and 20.6 million yuan respectively.

Guangzhou-based Kingfa said it plans to acquire several more companies "with technologies or products that supplement Kingfa's business" in the next few years.