Foshan Plastics Group Co. Ltd. is buying out one of its subsidiaries, but the payments to its two JV partners differ dramatically: US$25 for the 25 percent share held by Sumitomo versus 17 million yuan (US$2.6 million) for the 25 percent share held by Wuxi Packing.

Publicly traded Foshan Plastics said the subsidiary - BOPP film maker Wuxi Huanyu Packing Materials Co. Ltd. - has been in the red since 2008.

Sumitomo offered to give up its shares in October 2009, in exchange for the removal of its suretyship for Wuxi Huanyu's loans, according to Foshan Plastics officials quoted by multiple Chinese media. Wuxi Huanyu's liability topped 110 million yuan (US$ 16.6 million) as of June 30.

The 17 million yuan payment to Wuxi Packing, however, was calculated based on audited financial results, the company said.
Foshan Plastics expressed optimism for Wuxi Huanyu - which posted a loss of 13.4 million yuan (US$2 million) in the first half of 2010 - to return to profit by 2012.

Wuxi Huanyu is located in Jiangsu province in East China, a region that represents more than half of China's demand for BOPP film.

Foshan Plastics saw its stock price drop 4 percent on the day of the announcement. Shareholders and the financial community questioned about the move on the different payments, and also pointed out that Foshan Plastics decided to sell its 51 percent share of a similar BOPP film subsidiary for 41 million yuan (US$6.2 million) just four months ago.
China's BOPP industry at large stands in loss, financial analyst Xiao Hui with Shenzhen-based Huatai United Securities was quoted as saying in the 21 Century Economic Herald.

But the industry is expected to recover in the next one or two years, as market demand catches up with capacity, he added.