The first thing I do every morning in the newsroom is to clear unsolicited email of all types of subjects from across the world.

Many of them are Internet marketing materials from Chinese manufacturers, in particular, mold makers.

It doesnt surprise me that mold makers, in many cases also offering custom molding services, take the lead in aggressive Internet campaigns targeting overseas markets. I get the same impression from attending international plastic trade shows as well as discussions with industry sources.

Everything changes so fast in China, and so are these promotional email messages. Ive noticed major improvement of their content and format over the past two years.

First and foremost is the languageissue. For apparent reasons, these messages are always written in English. I remember some hilarious ones with incorrect use of words and strange syntax. I suspect they were translated by software rather than people with acceptable English proficiency. But, lately, I was pretty impressed with the almost perfect English in some of these unsolicited email.

Mr. Zhang, an owner of a mold shop in Shenzhen, told me everyone is studying English in China. My English has improved a lot last year. I realized how important it is, you know, I dont want to rely on my assistant for communication with western buyers. I take every chance to talk to native English speakers.

He made an interesting comment on the high turnover of his marketing staff. I always get new hires better than their predecessors. Theres no shortage of talent for such positions in the market, he said.

Back to the topic, the format of these email messages has evolved from plain text to embedded company logo and URL, to product photos, and to PowerPoint attachment. The information covers company profile, product display, detailed technical specs, photos featuring working scenes of every step of the production, as well as FAQ.

The vivid images add much credibility to the company, versus a fishy plain text messageby fishy I meant its hard to tell whether the sender has its own production facility or is just a sales agent.

Theyve also made subject lines and sender information more straightforward and user-friendly. For example, they now put the company name and location in the subject line instead of just saying quality molds from China or a new opportunity.

According to the Chinese Customs, China exported over $1 billion worth of plastic molds in 2006.

Christopher Devereux, managing director of consultancy ChinaSavvy, now resides in southern China. But he has a very interesting background -- specifically, extensive experience in the plastics industry in three continents, Europe, the Americas and Asia.

He first dived into the plastics business in the early '70s as a product development manager for an English investment bank that owned several manufacturing companies with extensive injection and blow molding facilities. Then he left his home in the U.K. and worked in the polymer industry in Central and South America in the mid-70s. In 1984, he returned to the U.K. to found a packaging company using injection molding and extruded foam thermoformed processes. Later he joined Packaging Corp. of America (Tenneco Packaging, Inc.) as business development manager for Europe and set up the company's first OPS packaging company in Belgium. He set up Chinasavvy in 2002 to help Western companies outsource and manufacture plastic and metal parts and products in China.

Hearing complaints every day here in the U.S. about China taking jobs away (especially in this election season), I wanted to pick his brain on the trends of geographical shifts of manufacturing. I'd like to share his reply with our readers:

Whenever labor jobs are lost, politicians scream. It's only natural. The United Kingdom politicians screamed as their automobile industry declined and as their manufacturing businesses slipped below the 50% mark (it's much lower than that now). Everyone said it would be the end of the British economy.

But what has happened there? The U.K. has now one of the most buoyant economies in Europe. The economy has shifted from a manufacturing economy to a service economy.

And the British, like the Americans, are good at inventing, designing and developing products. They know their markets. So what do they do? They invent. They design. They develop. Then they go to China and have it made and a third of the cost of making it in America.

The Chinese, on the other hand, are not good at developing products. They don't understand the markets. But they are good at copying and making to someone else's designs. It will be many years before they start producing home grown products that will beat American or British designed and developed products.

Remember the inflation of the last 20 years? Horrendous at times. Now we have low inflation. And why? Because the cost of goods coming in from China (and Asia) has brought down the cost of living and inflation.

If importing countries try to block these low cost imports they will find that prices will rise very fast.

What American producers and manufacturers need to do is to embrace the opportunities of an outsourced manufacturing base or setting up manufacturing within the China/Asia area. They will find that they can expand their sales and their exports through high quality/low cost manufacturing using their designs and IP.
There is a lot said about the lack of IP protection in China. This is changing but it only affects companies who want to attack the Chinese market. They have all the protection they need within the US.

Manufacturers who embrace the low cost manufacturing base in China will be the ones who will be laughing all the way to the bank.

If we look at economic history, the center of manufacturing shifted from the U.K. to the U.S.

The U.S. succeeded in overtaking the U.K. with higher productivity. Labor productivity in U.S. manufacturing was already roughly double the U.K. level in 1870, according to economist Stephen Broadberry. Measuring labor productivity by output per worker, the U.K. was still 36 percent behind the U.S. in 2000, according to a paper by the U.K. HM Treasury. About 65 percent of the gap was attributable to innovations, while physical capital accounted for only 31 percent, another research paper found.

How wide is the gap between China and the U.S. in innovation? As Devereux indicated, China doesn't excel in innovation at all. And the productivity is much lower than the U.S. level. Therefore, instead of seeing China as a threat, maybe it'll work better for all to respect the natural flow of manufacturing, especially the low-value-added, labor-intensive type. The future of U.S. economy can't depend on retrieving and retaining those low-level jobs. Expand the service industry and strengthen innovation, jobs will be recreated, and these upgraded jobs won't pollute the air and water either.

Plastics News' good friend Dan Harris came up with a list of why Chinese companies are having a hard time penetrating the U.S. market in a recent post on his China Law Blog.

My eyes lit up when I saw the list. That's exactly what our readers in China want to know, I told myself. I am seeing more and more Chinese companies at international trade shows and conferences. Demonstrating typical Chinese low prices, they crave a piece of the U.S. market, which in their minds is associated with hassle-free transaction, stable supply relations and sizable margins.

Many of the points are sharp and insightful, but in order to shed some light on the deep causes of these market-entry blunders, I'm adding comments under each point. There are also things that I have a different opinion on, and I'll tell you why.

1. Chinese companies focus on a Chinese consumer, not an American one.

Comment: Chinese companies would like to find out more about their target American consumers, but they mostly rely on personal-level approaches to collect business information, lacking a systematic and scientific market investigation conducted by professional Westerners that understand the market.

2. Chinese companies fail to realize that one reputation -damaging mistake in the United States could doom them forever here.

Comment: This one is dead-on. And how come they don't realize this common sense? Because they get by in China and assume it's the same in the States. See my recent post A monumental blacklist for more.

3. Chinese companies fail to realize it will take time for them to make an impact in the United States and they are unwilling to spend the time and money necessary to do so.

Comment: Chinese people take such pride of the fact that industrialization, urbanization and modernization have happened in China in a much shorter period time than in the West that they believe, if you try hard enough, everything can be done fast and well. Why don't they invest enough money to lay the ground work for the new market? Well, they look at the exchange rate. The same exchange rate that makes the Chinese production cost in yuan seem so low magnifies the marketing cost in dollars in the States.

4. Chinese companies focus too much on the end result (making money), and by doing so, they sacrifice the professionalism that would allow them to achieve long- term success.

Comment: The Chinese would ideally like long -term success. But the drastic social, economic and political upheavals and changes in the past century have paralyzed Chinese people's long-term thinking. Fill the pocket as full as possible before the next change hits, be it credit policy, industry standards or consumer interest.

5. Chinese companies tell users what they want instead of listening to users.

Comment: This obnoxious mentality is a hangover of the old Soviet-Union-style "planned economy" (1949-1978). That period of time featured insufficient supply of necessities and one-sided propaganda. Although it's hard to question about China running a market, capitalistic economy today, the country skipped some vital steps in the development of the Western countries.

6. Chinese companies focus too much on making money in the short term, rather than on building the quality necessary to sustain themselves in the long term.

Comment: What pops up in my mind includes: vicious and endless price wars, a business environment that has deprived consumers their say, and lack of technology and craftsmanship.

7. Chinese companies fail to understand how beauty and design might distinguish their product from that of their competitors.

Comment: Traditionally, domestic consumers simply can't afford beauty and design. Price is the only distinguishing point. Plus, the companies don't want to invest much on design, because it's bound to be copied by competitors right away, thanks to the absence of intellectual property protection in China.

8. Chinese companies rely too much on phone calls and face-to-face meetings instead of e-mail.

Comment: This is probably part of the Asian culture, underscoring personal communication instead of machine-generated and less interactive e-mail. I don't think it's necessarily a disadvantage though. Japanese companies have done well in the U.S. market, despite their preference for in-person meetings and phone calls rather than e-mail.

9. Chinese companies fail to use "simple and elegant designs."

Comment: Unfortunately, they are trapped in between complicated traditional styles and a blank page of modern Chinese inspiration. Again, they can't justify investment on design, because it will be copied by competitors overnight.

10. Chinese companies fail to realize their need to hire MBAs and those with local knowledge.

Comment: Call them cheap or arrogant. They don't trust MBAs or Western veterans unless foreseeable return is guaranteed. They also want everything under their control, not threats and risk brought by language barrier and different business values.

These are just my opinion. I welcome yours.

Bob Kroshefsky's recent letter to the editor in the February 11 issue of Plastics News and on the PN Web site at here showed understanding and sympathy for the difficulties Chinese factories have undergone lately and also rightly pointed out that the lowest-possible-cost mentality is what is causing quality issues. Kudos for that!

However, his speculation that "Even if someone there raised the lead-paint-and-kids issue, well, hell, the toys are going to be exported, so it's not like we'd be endangering any of OUR kids" neglects the reality in Sino-U.S. trade. I have no way to prove that the Chinese don't ever have any nationalistic thinking in doing business with foreign countries. But I know for a fact that China's exports are of much higher quality than goods sold domestically. Market regulations and standards play a large role, in part because the Chinese, three decades ago, had very little merchandise in the Communist planned economy. Having started from scratch not long ago, the country has a long way to go before it pars its product standards with developed countries.

Products that contain lead paint and other hazardous content are very common in China. Even with the rising awareness of product safety, consumers in China are much more vulnerable than their Western counterparts, due to the lack of information and a consumer-rights system to back them up. A nationwide recall system, such as the Consumer Product Safety Commission in the States, is nonexistent.

In the Mattel case, the paint supplier violated its contract with the factory and sneakily sent over substandard paint. The factory was completely unaware of it. Did the paint supplier ever reflect on the lead-paint-and-kids issue? We don't know. But if he'd thought his dirty trick wasn't going to harm his kids, he'd be wrong. Sadly, the recalled Mattel toys returned to China and climbed on its store shelves! Yes, consumers in China are still buying the products that America threw out because of the danger. Why do they remain stocked in China's stores? A Wall Street Journal article unfolds the complex situation:

In the U.S. and Europe, a wave of recalls of Chinese-made goods during the second half of 2007 led to heavy news coverage and a coordinated effort by regulators and the toy industry to pull dangerous products off the shelves. In China, it is a different story. The nation has no comprehensive rules governing recalls and no system for tracking injuries from defective products. Together with a thriving trade in black-market products, that means some of the goods that have caused alarm in the West are still available to Chinese consumers.

The situation is a reminder that often the people most at risk from China's public-health and safety lapses are the Chinese themselves. It raises questions about the responsibility of multinational companies to keep dangerous toys off the shelves in parts of the world where consumer-protection laws are weak and the threat of legal liability is relatively low -- but also about their ability to do so.

And the incentive for selling the hazardous toys rejected by the U.S.?

When U.S. companies cancel orders because products are defective, Chinese factories loath to lose money may resell the recalled goods out the back door. When the defect lies with the manufacturer rather than the design, the big brand may decline to pay the plant for the tainted toys -- often ensuring they won't be returned. Dangerous toys can wind up on Chinese auction sites like Taobao or in retail stores through a murky chain of suppliers.

Peter Humphrey, managing director of ChinaWhys, a Shanghai-based supply-chain monitoring firm, said the Chinese business-to-business world is 'full of shoddy, illegal goods.' He said enforcement is 'nonexistent, and people will sell whatever goods they think they can get. . . . There is a very lawless, unregulated Internet trade here in China.'

Back to Kroshefsky's concern on Chinese nationalism, who are the Chinese kidding? As the ancient idiom goes, harm set, harm get (Hai Ren Hai Ji).

Mr. Kui Cai, a 20-something engineer with injection press giant Ningbo Haitian Group Ltd., is stranded in Ningbo by the snowstorms. But he's excited! He received help buying a new condo and a free vacation package as Chinese New Year gifts from his bosses.

Cai, a native of the Jiangxi province, joined the research and development department of Haitian in 2006 upon college graduation. He and his new wife, also from Jiangxi, were ready to go back to their home province for the Spring Festival this year, but were forced to cancel their trip because of the snowstorms lashing China. So they found themselves with nowhere to go in Ningbo for the holiday.

The couple had planned to settle down in Ningbo to be together near Cai's work, so they started saving for a down payment on a condo. But the money was not adding up as quickly as they had wished.

When Haitian management heard of the couple's situation, they offered Cai 80,000 yuan to cover the condo's down payment.

Now the couple is busy decorating their new place for the holidays.

"Without the generous help from the company, I wouldn't know how to have a decent New Year," he told the local newspaper.

Cai also can't wait to use his bonus vacation package. The company will pay for everything during a one-week trip to Hong Kong and Macau, he said. He's never been off the mainland.

But Haitian is not the only plastics company that's going the extra mile to make sure their nonlocal employees enjoy the Chinese New Year even when they can't spend it at home.

Hangzhou-based Wahaha Group, China's beverage giant with in-house bottle making capacities, said most of the nonlocal employees are staying in Hangzhou for the Chinese New Year. Company executives, including the president and chief executive officer, invited all employees to attend the company's New Year's Eve reception. Wahaha organized performances and other entertainment activities for the celebration. The employer also tripled the pay for those who work during the holiday, plus overtime allowances.

Processor Zhejiang Guangbo Group Co. Ltd. originally had planned to escort 800-plus migrant employees home via charter bus services. As the snow blocked the roads, the owner immediately ordered 1,000 comforters for the dorms and arranged for a holiday celebration and local tours.

Information in this post is based on Chinese-language coverage in Ningbo News and China Business Times.

To try to help Westerners understand how important the Chinese lunar New Year celebration is and why the snowstorms blocking holiday travel is such a big deal, let's take a common image we see here in the U.S.

Christmas is a time when many families gather, with the fireplace glowing, the Christmas tree trimmed and children anxiously awaiting Santa Claus. Now think of the family member who has to miss this annual gathering and multiply that by ten. Because odds are that the family member who misses the Christmas holiday will have other opportunities during the year to see his or her family. This is not the case for Chinese families, and many times it's the only time during the year that young families will see each other.

Unlike in the States, it's not uncommon for Chinese families to be located in different parts of the country. A typical scenario in China is one where a husband works as a laborer in a big city while his wife and child stay home in the village. The half-month Chinese New Year celebration is the time when Dad comes home, bringing hard-earned money and new clothes for the family, plus it's time for him to restore his energy for another tough year on the assembly line.

I read a story about a Chinese migrant worker who reportedly boarded a first class flight from Guangzhou to Chengdu with a packed comforter and plastic bucket. Some might question why he traded a big chunk of his annual income for a first-class plane ticket because coach seats sold out and trains and buses stopped running. But many others understand his choice, knowing how important a family reunion during the lunar New Year is to an ordinary Chinese man who works out of town all year round.

As epic snowstorms continue to slam southern, central China, many Chinese have been stranded on their way home for the Chinese New Year, which falls on Feburary 7 this year.

Officially, the national holiday is seven days long, but most factories shut their doors for up to a month around the holiday, since it's the only time during the year when millions of migrant workers -- many traveling several days by train and bus -- can visit their families.

And because many plants are already closing for the holiday, I don't think the brutal blizzards should have too much direct impact on the plastics industry. A report from a Chinese plastics Web site confirmed my theory, sort of. In its forecast (viewable in Chinese at info.plas.hc360.com) on polyethylene pricing, the author says:

Almost all of the downstream processors have stopped production. Some trading businesses also have completed their annual plans and started vacation.

Although paralyzed transportation has caused a materials price hike on the seller's end, the report said, demand is staying low with little transaction being observed.

In the longer term, however, the industry will see impact. The Chinese government reported a direct loss of 22 billion yuan (more than US$3 billion) as of Jan 29. If the storms trigger higher inflation or a slowdown of the economy, the plastics industry will hurt as well. On a bright note, suppliers of plastic agricultural film and construction material might see a rise in demand.

For some reason, the Chinese government hasn't played tough on enforcing intellectual property protection. It makes you wonder how effective the recent ban on ultrathin plastic bags and free, thicker shopping bags will be. It seems like government officials need a reason to prioritize. For example, let's take a look at a recent issue in the media I've had experience with, but that's not related to plastic: bicycle theft.

A January 24 Reuters story said that police in China claim they have cut bicycle thefts by half over a nine-month period. The news story said that:

China has halved the number of bicycles stolen to about 2 million in the past nine months...following a campaign to clamp down on theft months before its capital hosts the Olympics.

The story continues,

To help battle the theft problem, the government introduced a system of identification numbers, and buyers must register their bikes using their real names as part of the effort to curb widespread theft.

In addition, an earlier story said the police also reward any tips that lead to an arrest of more than 15 bike pilferers and seizure of more than 50 stolen bikes.

Despite what the story says, the nine-month bike theft rate of 0.4 percent (2 million divided by 460 million) seems low to me. Bike thieves caused me constant headache during my college years in Beijing. I lost a total of eight bikes in four years. I was advised to buy cheap, used bikes (less than US$8) from special vendors to minimize loss caused by theft. (No, there's no comprehensive insurance for bikes.) And guess what? When I was shopping for my fourth bike, I actually found my first bike! Of course I had to pay to get it back. That's when I came to realize how the system worked.

Anyway, I'm glad someone is doing some sort of real crackdown now. It just shows that if the government wants something done, it can be done. Better late than never, I say.

Now, let's get back to plastics. What's the latest public reaction to the plastic bag ban? I gathered these interesting tidbits from various Chinese online media sources:

Plastics wholesalers have reported rising sales of ultrathin plastic bags to individuals. I guess these bags are being stocked up for family use, such as to contain garbage. Not sure whether and how the government will punish the use of ultrathin bags for non-commercial purposes.

Cashiers in supermarkets have reported that some customers have been asking for extra shopping bags. Get as many free bags as possible while they last! Stock up!

A gentleman in Beijing said he started using a cloth shopping bag, but supermarkets bagged his cloth bag with a plastic shopping bag. He thought it may be because of the advertising on the bags.

Vendors in farmer's markets told the press that they already de facto charge customers for plastic bags. "It's part of our cost. Plastics bags have never been free really." Of course, same thing with supermarkets and stores that list written prices.

A consumer reported that he was given a little extra vegetable when he declined to take plastic bags at a farmer's market.

We all know that the enforcement of intellectual property protection in China is just not yet in place. You can see it everywhere in that country, from pirated DVDs found on most street corners to coffee shops with names that sound an awful lot like Starbucks, not to mention the large-scale "silk markets" selling top-grade counterfeit purses, watches and apparel in Shanghai and Beijing.

But to be fair, these "fake markets" have thrived largely on foreigners. The Shanghai Xiangyang market, which had US$60 million in annual sales before a crackdown in June 2006, claimed that 80 percent of its customers were Westerners.
Touring "fake markets" may be entertaining for the casual Western shopper, but the lack of IP protection really hurts when you are the one suffering infringement.

Battenfeld Extrusionstechnik GmbH in Bad Oeynhausen, Germany, is a recent victim in the news. It entered the Chinese market in 1996 by establishing joint venture subsidiary Battenfeld Chen Extrusion Systems Ltd. in Foshan, Guangdong province. Partner Chen Hsong was later phased out of the deal, and the company updated its name to Battenfeld Extrusion Systems Ltd. in 2006.

Battenfeld recently announced victory on an IP infringement case against three Guangdong subsidiaries of Hong Kong's Cosmos Machinery Co. Ltd. The case has come a long way from when Battenfeld filed it back in September 2003 at a local court in Foshan.

According to the verdict of the Dongguan Intermediate People's Court, dated November 8, 2007, the case was transferred from Foshan to Dongguan on November 30, 2004, and finally two hearings were held in April and June of 2007.

The copy of the verdict I'm referring to was supplied by Cosmos, who argued that Battenfeld's news release -- still available online at here -- contradicts the court ruling and is misleading.

The issue at point is how many of the defendants were judged guilty. Battenfeld's release pointed at all three Cosmos subsidiaries. Cosmos said only one was found guilty, and that was Donghua Cosmos Machinery Ltd. But the discrepancy is easy to solve. The court verdict clearly maintained that only the Donghua subsidiary infringed on Battenfeld's intellectual property by making single-screw extruder model P0450.

Cosmos also said it has appealed the judgment to the Guangdong High People's Court, so the case is not yet final. That's true. It might be a little early for Battenfeld to throw a party. But, even this preliminary success is encouraging to Western investors as well as Chinese companies that own patents, technologies and brands.

And who knows? Maybe Battenfeld will be able to supply more solid evidence and secure bigger success in the litigation. But this is all still up in the air, and it's pointless for me to speculate. What I can tell you, though, is that protecting your own products is no easy task.

The Dongguan court overruled some of Battenfeld's evidence, including testimonies from two of Battenfeld's Chinese mold suppliers. In written testimony, the moldmakers said Cosmos asked them for quotes for molds, and that Cosmos' drawings were almost identical to Battenfeld's molds.

The court also rejected photographic evidence that was taken at the 2007 Chinaplas show in Guangzhou. The court documents said, "Although it says 'Cosmos Machinery' and 'DEKUMA Welltec' in the photos, there's no way to verify whether these exhibitors are the defendants in this case. Also, the plaintiff can't prove this is relevant to the commercial secrets in dispute."

Battenfeld did request the court to collect evidence from Chinaplas organizers, including Adsale Exhibition Services Ltd., the China Foreign Trade Center, the National Light Industry Association and the Guangdong Plastic Processing Industry Association. But the court overruled the request based on Chinese laws, the same court document said.

So really, it becomes a heavy burden on the victim's shoulders to collect evidence that's acceptable by the local legal system. For multinational companies that operate in different countries, it's additionally challenging.

It's not easy even for Chinese local companies to defend their rights in their own country. Injection press giant Haitian commented on that in a speech at a Plastics News conference. In Haitian's headquarters city of Ningbo alone "there's another hundred companies that make machines the same as ours. Thirty of them use our logo to a certain extent," said Helmar Franz, Haitian International Holdings Ltd.'s executive director.

China also lacks an environment conducive to public opinion. Plastics News is the only publication in China that has reported Battenfeld's litigation with Cosmos. The state-owned media may fear pressure from the top, and private publications have been known to make compromises to keep their advertisers.

But if such information is not delivered to the public, violators of IP laws will never need to worry about their corporate reputation and branding. That's not fair to customers and the general public who deserve to be made aware of these happenings.

Stay tuned. With independent and unbiased principles, Plastics News will follow this case through.

What does it take to get a "gold bowl" -- a permanent, prestigious and well-paid job and become a government employee in China? The short answer is "a lot," even more than what it takes to get hired by a Fortune 100 company's Chinese operation. Since I write for Plastics News, I'm not going to tell you all the unspoken secrets about Chinese government's human resources practices.

But here is a tip about what some Chinese government employees have to do to keep their jobs, which I bet their American counterparts can't even imagine. Next time you go on a trade mission to China, you can feel more knowledgeable about the society.

Government employees in the Dongpo District of Meishan City in China's southwestern province Sichuan (known for its spicy cuisine) are required to recite at least 10 poems written by ancient poet Su Dongpo, who the city district is named after, according to Sichuan News Web.

The local government organized a training session on the poems and distributed study materials.

What is the point of doing this? An official said: "When receiving foreign and domestic guests and potential investors, if an official couldn't even recite some Dongpo poems, wouldn't it be embarrassing?"

I don't think any businessman will base an investment decision on local officials' knowledge of ancient Chinese literature.

But the official also said something more telling, "[studying the poems] won't affect their regular work, we just encourage people to spend some of their drinking and card game time on studying."

There you go, drinking and card games. They are not just personal hobbies. Believe it or not, they can be work. Recently, a Chinese local official, Mr. Guo, died from drinking at a late-night reception (this is considered overtime work) and received an award, according to Oriental Today.

Mr. Guo, age 46, died "at work," according to a report. After it was revealed to the public that his death was by alcohol, the government said it would take back the award. But I actually feel very bad for him, because drinking is part of a government job, and he did die for his work.

If you refuse to drink to "bottoms empty" at a traditional-style reception in China, you are deemed disrespectful to the host or the person who toasts you. Mr. Guo and his family deserve something from the government, maybe not an award, but perhaps a change in the system?

Speaking of change, the local government had introduced an alcohol ban long ago. After Mr. Guo died, officials interpreted the ban to the questioning press: "the ban is only for lunch, not for dinner."

I guess I'd prefer the poems to drinking. But nothing is optional in the political world.

I thought readers of my China blog would not only be interested in plastics in China, but also China as a country, a culture, a business battlefield and a phenomenon. Therefore, from time to time, I'm going to share bits and pieces of news and facts that may help you understand the ever-changing China better. And sometimes, the news and facts out of China can be odd, like this one below.

Oriental Today reported a striking proposal by a real estate giant in Beijing, who suggested demolishing the Forbidden City, the Chinese imperial palace from the Ming and Qing Dynasties located right in the middle of Beijing.

"Instead of spending billions [of yuan] every year on renovating and maintaining the palace, why don't we blow it flat and build real estate? It will significantly help skyrocketing housing prices in Beijing caused by lack of land," the unnamed businessman said.

What's more, the statement was backed up by an industry group official. Hu Yunjing, president of Beijing Real Estate Business Association, explained that, if the land the Forbidden City sits on now can be used for residential construction, it will provide 24 million square meters of housing for at least 1.2 million residents. "That will bring down the housing prices," he claimed.

I was speechless. Do they really believe it's a smart idea? By their logic, New York City should convert the Central Park to high-rises and Paris should transform Musee(sorry, the blog editing tool doesn't support accented letters) du Louvre to hot-selling condos.

And the truth is, Beijing's housing prices, some parts of which are catching up with Manhattan, won't come down no matter what. People from all over the country continue to flood in. And the real estate people know this the best. Their goal certainly is to make more money (as if they haven't made enough by doubling and tripling prices in the past few years), not to reduce or stabilize prices.

It's chilling to see how some Chinese people and businesses are becoming more relentlessly capitalistic than barons in the Enclosure Movement in Europe.

They seem to see nothing more important or meaningful in this world than money. If that's the case, it's no wonder that toxic products continue to be manufactured, substandard buildings continue to be constructed, workers continue to lose their health in poorly regulated factories, and the air, waters and land continue to be polluted.

It was only a couple of weeks ago that I wrote a blog item about Blu-ray discs. The question came out about whether counterfeit Blu-ray players exist (got to be more profitable than knocking off Blu-ray discs, right?). Click here for the original posting.

Guess what? Blu-ray disc players themselves may have infringed a patent owned by a Columbia University professor emeritus. The U.S. International Trade Commission is going to launch an investigation into some 30 U.S. and foreign companies on possible patent infringement related to Blu-ray disc players and other products, Reuters reported.

The commission posted a news release Thursday on its Web site, explaining the issue in dispute:

The products at issue in this investigation are short-wavelength (e.g., blue, violet) LEDs and laser diodes that are used in products such as hand-held mobile devices, instrument panels, billboards, traffic lights, HD DVD players (e.g., Blu-ray disc players), and data storage devices.

The list of involved companies highlights big names including Sony Corp., Nokia, Motorola Inc., LG Electronics Inc., Panasonic maker Matsushita Electric Industrial Co. Ltd. and Sony Ericsson Mobile Communications AB.

It remains a mystery whether Americans will buy more made-in-USA products during the economic slowdown or recession to protect the domestic economy, or buy more imported, cheaper items, to hold on to their wallets.

I asked exhibitors and attendees at the three-day International Home and Housewares Show in Chicago what they think will happen. Their response was mixed. I guess nobody really has the answer, they just hope to survive the hard times.

Meantime, although made-in-China has become a synonym for cheap imports, rising costs--including stricter quality control and inspection--in that country may raise commodity prices in the U.S. market.

Will the U.S. ditch or reduce imports to invigorate its own manufacturing at this critical point in time? Or will it rely more on imports to keep inflation down and maintain living standards?

Dell Inc. recently said it will purchase large amounts of components from China to help reduce cost, according to a Reuters story. The computer hardware manufacturer plans to buy US$23 billion of components from China this year and US$29 billion in 2009.

It looked like it's a clear upward trend, until I did some simple math.

Based on the fact Dell will buy a total of US$70 billion of computer-related supplies and equipment from China over the 2007-2009 period, also according to the Reuters story, we can easily figure out that Dell actually spent US$38 billion outsourcing from China in 2007. From $38 billion to $23 billion to $29 billion, would you say it's a boost of spending on outsourcing?

We need a bigger picture here. Is Dell's overall spending on outsourcing going up or down? At what kind of rate? Is China's share of Dell's outsourcing total rising or dipping? What are Dell's other major low-cost import countries? Where is the ratio of Dell's U.S. manufacturing versus overseas procurement headed? These are the questions multinational corporations need to answer, to provide the public with a better idea of what's going on in the economy.

One of China's richest women, Zhang Yin, is in Beijing attending the annual session of the national political advisory body--Chinese People's Political Consultative Conference (CPPCC)-- March 3-14, but her proposal for amending the new labor contract law doesn't seem to have a chance.

Zhang has suggested the law exempt labor-intensive companies from having to sign permanent contracts with staff with 10 years' service. She was criticized by some CPPCC members.

China's Ministry of Labor and Social Security quickly responded to the press coverage Zhang's controversial proposal received. "Whether to amend the law contract law or not is not a question. The question right now is how to enforce this new law effectively," said deputy minister Sun Baoshu at a March 9 press conference, according to China News Agency.

"Some companies believe the new law is increasing their cost. That's because they didn't have to provide social security taxes. ... It is not right or legal to chase profits by scarifying workers' rights," he said.

The blaze that killed 15 last week at LongFei Recycling Co. Ltd. has been brought to the attention of China's central government. Head of the State Administration of Work Safety (SAWS), Li Yizhong, told the press that an investigation is under way with joint forces of a few ministries, according to New Express Daily. But no further information is available at this point.

Plastics News reported on the incident with extensive details in a February 29 story.

SAWS is one of the most closely followed national agencies in China, especially due to notorious coal mine disasters. Chinese workers in general are more vulnerable than their counterparts in other countries where safety measures are better enforced. A study revealed that China's casualty-GDP ratio goes up as the economy accelerates its pace.

The image of SAWS has become so negative that one of its spokesmen complained about being deemed a jinx. This official, Huang Yi, said February 26 during an online public chat that, "if the public feels that I bring nothing but bad news, I really hope I have less and less chance to appear... I'd rather disappear."

Well, it's my hope, too, that the country will cut down workplace accidents.

Yi added that he is sad about how the public equals work safety to accident/disaster. What he meant was, the public is earful of striking work accidents but doesn't hear about how preventive safety measures are put in place or how violators of safety regulations are penalized. Therefore, the terms of "work safety" and "work accidents" mean pretty much the same thing to them.

That is sad indeed.

Everyone knows labor is cheap in China. Unfortunately, it's not just the hourly pay that's cheap. It's also their health and lives. Every time a coal mine explosion happens in China, we hear how victims' families have a hard time getting any compensation and a "decent" settlement on a dead body only requires a few thousands, sometimes even just a few hundreds, dollars.

In my opinion, China won't have world-class manufacturing until the labor condition is improved.

Like it or not, now that Blu-ray has become the default next-generation disc format, the prices are already sneaking up.

An online report said that prices of Blue-ray disc titles have gone up on Amazon.com and Sony's new Blu-ray players will cost more than the old models.

But what if China is to make Blu-ray discs?

Word has it that a Chinese manufacturer is about to start production of Blu-ray discs. "Everything is ready. Once molds and the master disc arrive, mass-scale production will begin," according to a leading IT Web site in China.

That may be good news for global consumers, as China seems to always be able to offer low costs.

It is also speculated that this company will either be Henan Kerry Digital Co. Ltd. of Anyang, Henan province (100 percent Hong Kong ownership) or Dalian Hualu Group Co. of Dalian, Liaoning province.

Panasonic, a shareholder of Hualu, also makes Blu-ray discs.

Billionaire Zhang Yin, who topped China's wealthiest citizens' list in 2006 with a fortune of US$3.4 billion, appeared the other day as a political figure and told the press that the country's new labor law could use some amendment, according to a news report.

Zhang is going to submit a proposal to the Chinese People's Political Consultative Conference (CPPCC) at the upcoming annual conference in Beijing. She is a member of CPPCC's national committee.

"Requiring employers to give contracts of infinite length to workers is going back to the old times in China," she told the Chinese press, adding that the new labor law, which came into effect January 1, has already increased unemployment and impacted low-skilled and undereducated people in particular.

China's new labor law requires all employers, whether foreign or domestically-owned, to enter into written labor contracts, either fixed-term or open-ended, with the employee.

The law also stipulates that open-ended contracts must be signed if the employee has been working for the employer for more than 10 years or if the worker has already completed two fixed-term contracts.

Employers will be subject to a penalty (double the severance pay) if they fire workers without "good cause" before their contracts expire, according to the new law.

There has been wide speculation by consultants and economists that manufacturing in China will lose much of its competitive advantage under the new law.

But if Zhang's amendment proposal gets through, it will be a different story.

Although she has been living in the United States for almost two decades, Zhang remains well-connected in China in both political and business senses. Her father was a lieutenant in the People's Liberation Army.

Zhang built China's largest paper recycling business, Nine Dragons Paper. Although China's latest richest person is Yang Huiyan, a Ohio State graduate whose father handed her the real estate family business, Zhang still is the richest self-made woman.

Plastics News managing editor Don Loepp pointed out the attention the Western media gave Chinese product-quality issues last year in a recent post, as a few U.S. news reports on the subject have become strong candidates for the 2007 Pulitzer Prize awards for journalists.

"China is a land of toxins and danger. Our homes may be full of made-in-China products, but we look at them suspiciously," Loepp wrote, summarizing the prevailing perception of China in the United States.

He also rightly pointed out that a Pulitzer may trigger Washington to take a closer look at Chinese manufacturing and product quality.

The same issues also have been recognized in China with the country's Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) listing the Mattel recalls as one of the "Ten Most Influential Events of 2007."

Besides pressure from its overseas buyers, Chinese manufacturers now face enraged domestic consumers who've read about Western countries' reactions to unsafe products and realized that their own domestic goods are much worse but nobody is there to safeguard them!

AQSIQ and other authorities have, since June, fast-tracked a few projects targeting better product information transparency and stricter quality control. The newly launched online database "Product Quality Credit Records" is empowering the average Chinese consumer in an unprecedented measure.

The same agents are also building a "China Import and Export Products Inspection and Quarantine Information Bank." The Chinese version is expected to go live online March 15 and the English version on June 15.

With such a system, Chinese users will be able to have one more reference before they make a purchase. Profit-driven manufacturers will no longer be able to pass off their recalled products onto domestic consumers.

All of this, without the recalls in the West, wouldn't have had a chance to be accomplished any time soon.

So, in a sense, Chinese consumers owe Americans, the biggest importer, a thank-you. Thanks very much for heightening China's awareness of consumer rights and helping clean up the marketplace, whether it was intended or not.

Labor workers of Chinese exhibition companies certainly aren't contenders for an American spelling bee contest, but they should know the 26-letter modern Latin alphabet used in English, which constitutes the Chinese pinyin system, the very first lessons of 1st grade. Maybe workers mistook it for a language other than English, but the letter "l" in the word plastic is upside down.

Photo taken by Nina Ying Sun

I took the photo at the Chinaplas show, held April 17-20, 2008, in Shanghai. I jokingly told the company about the sign, and the manager said they didn't discover the error until the show opened, and since the sign was high up in the air, near the ceiling of the hall, it couldn't be easily fixed.

Plastics News had the same problem with our sign at last year's Chinaplas in Guangzhou. Our editor Bob Grace spotted the problem and had show service workers fix it right away.

Forget about the poor workers who make $100 a month, the question is if the exhibition company had any quality control or proof procedures. Or did they just skip it like some toy makers?

It didn't surprise me that at 4 p.m. Friday, the Yonghegong Lama Temple in midtown Beijing was still busy and at least half of the visitors were foreign.

When visiting religious venues in China, remember it's difficult to define Chinese people's religious beliefs, but one thing is for sure: They are very pragmatic and worship all those who can bring them wealth and fortune (or more specific things such as good grades, promotion, lottery...anything you can think of). In order to be blessed, some people generously donate to temples, and others leave coins and change at every possible "auspicious spot." And, foreigners are following suite. When in Rome, do as the Romans do, I'm sure.

Apparently, a stone animal in the West Pavilion of the Lama Temple is considered one of these auspicious places. People were feeding it with money. The animal is believed to be one of the nine sons of the dragon, from Chinese folklore, and considering the pavilion was surrounded in fencing, people really had to make an effort to place their money in range of the beast.Photo taken by Nina Ying Sun

The ancient incense burner was clearly the target of flying coins, in spite of a bilingual sign on the side asking visitors not to throw incense and coins. Westerners were just as excited as the Chinese to try their luck. Photo taken by Nina Ying Sun

Photo taken by Nina Ying Sun

I was thinking, hey, people are just having some fun in the garden. No big deal.

Then, I stepped into the formal halls with the Buddha sculptures and service items from the Qing dynasty. Another sign advised not to use camera. You may think Chinese people are never good at abiding by rules, judging by how they drive. But they don't want to risk their fortune by disrespecting rules right underneath Buddha's nose. I watched a foreigner slip into the corner of the pretty dark room and quietly take a photo without flash. I'm not sure if the staffer lama not far away noticed that. But nothing was said. Chinese tourists who stood close to the foreign tourist just walked away as if nothing happened.

I could have told the lama on the prohibited use of the camera, but I was lost in my own thoughts at that moment. I was recalling a scene at the Shanghai Hongqiao Airport. At the jammed waiting hall for security check, a group of European tourists were pretty harsh with a Chinese woman who tried to cut in line. They spoke loud in English with thick accent, signaled the security and didn't want to listen to her explanation of being late for her flight. The security person let the woman go to the front of the line after checking her boarding pass, and then the group of Europeans booed him.

Nothing should be generalized or taken out of proportion here. All I can say is, Beijing is a melting pot and at the same time a clash of old and new, domestic and foreign, rich and poor, individualism and collectivism, values and rules, etc. There's never a dull moment.

When the great Tang dynasty poet Bai Juyi, also widely known in Japan as Haku Rakuten, first came to the then-capital of China Changan, now known as Xian, a friend made fun of his name-- which literally could mean "free living is easy," saying: "Everything is expensive in Changan; living here is not easy."

The relatively high living costs in a capital city are understandable, based on fundamental economics.

However, the Chinese government is intervening and making Beijing less expensive than it would otherwise. Take transport for example. A two-yuan (roughly US$0.30) metro/subway ticket can get you anywhere along Beijing's four existing lines (1, 2, 5, 13); whereas in Shanghai and Guangzhou, fare is calculated by distance, and two yuan is only good for a one-way trip of up to 4 kilometers.

Beijing also offers the most affordable taxi service, compared to Guangzhou and Shanghai. Among the three major cities, cabs in Guangzhou are the most expensive.

About seven years ago, when I lived in Beijing and commuted to work by subway every day, the train wasn't as crowned as it is nowadays, but it still had substantial traffic. In China, crowds of people mean juicy markets. Hence the existence of underground businesses on subway trains. Taking advantage of the one-ticket-for-any-distance-any-time rule of the Beijing subway, beggars and unlicensed newspaper and map sellers used to work on the trains all day.

And now, as Beijing anxiously tries to polish its image, I've heard that the city administration is minimizing the presence of beggars, homeless and unlicensed street vendors. On my visit a couple of weeks ago, I didn't see a single street vendor and only met one beggar during rush hour in the subway. And most passengers were just trying to stay out of his way, rather than give him money.

Beijng's metro lines 1 and 2 seem to have been around forever; lines 5 and 13 are relatively new. Still, the current system is not meeting the transport needs of the capital city's 17 million residents. I even met a cab driver who, instead of taking my 60-yuan-worth of business across town, took me to the nearby metro station for 11 yuan, rather than navigate the crowded roadway. "I don't want to get into the traffic jam on the main roads," he said, "even if you pay me to."

According to a subway map on the official Web site of the 2008 Olympic Games, the Beijing metro system will expand a few times and become a huge web that covers the entire city. Beijing metro blueprint

The purple line 10 on the map is expected to start running in June. It will accommodate locals and, in August, Olympics tourists. Other lines on the map are planned to be completed in different stages by 2015.

The blueprint reminds me of Tokyo's extensive metro webs. There are a number of metro companies in Tokyo, instead of one government-backed system. Metro tickets are not cheap, but with the heavy road tolls and expensive parking, people prefer public transportation to driving. Here is the map of just one of the metro companies operating in Tokyo.Photo taken by Chen Lin

I wonder how much the government is subsidizing the Beijing metro. Maybe lessons can be taken from the Tokyo metro industry, for a more diversed and faster-growing system based on market laws.

Everything is under construction.

And the massive Forbidden City, i.e. the Palace Museum, is no exception. All three major halls where emperors held sessions with cabinets were being renovated. Such a disappointment! I was told the Forbidden City has a total of 9,999 rooms. But, at least for me, the rooms that count are those three magnificent ones. They are the ones that visitors must see.

But to the north of the Forbidden City, the construction scene looked encouraging. The National Stadium -- or the Bird's Nest -- and the National Aquatics Center, also known as the Water Cube, are next to each other. Construction of the Bird's Nest is being finished. The Water Cube has been done for a while, and for a period of time was open to the public. But now it's also being prepped for the Olympic Games to open August 8.

Photo taken by Nina Ying Sun

I was wandering around on the site, thinking how contemporary and gigantic these buildings are. Then some people walked by, discussing how expensive it will be to maintain the plastic-film exterior of the Water Cube. "It's easier to build than to clean this thing in Beijing's environment," I heard.

Speaking of which, many building exteriors in Shanghai and Beijing, as impressive as they are, could really use a thorough cleaning. But I guess the cost can add up with all the dust and chemicals constantly floating in the air.

There used to be a popular slogan "New Beijing, New Olympics." It was part of China's campaign to become host of the 2008 Olympics. I still remember how the entire city of Beijing was transported with joy on the evening of July 13, 2001, when Juan Antonio Samaranch announced it had been awarded the right to host the global sports game.

Nearly seven years have passed since then. And, since I've been away from Beijing for a while, I decided to visit my second-hometown before tourists from all over the world embrace for the Summer Olympics in a city with 3,000 years of history. How did this new Beijing strike me?

In the taxi line of the Beijing Capital International Airport, I felt at home with all the Beijing and northern Chinese accents. My travel companion and I were greeted warmly by our cabby -- in English! Well, that's probably because we were speaking English when the cab pulled up. I started to chat with the 40-something driver in Chinese. But he asked me to switch back to English, so that he could test his language proficiency.

"I'm a volunteer for the Olympic Games," he said, with much pride. A native Beijing resident, he's been learning and using English for his job for seven years, he said. He will even take full-time training in June for Olympics volunteers. "I learn English from customers every day. I learned the word smoggy yesterday when a Canadian lady was commenting on the weather."

Photo taken by Nina Ying Sun

Well, it's true, I didn't see the clear, blue sky of my memory of Beijing in the springtime. It was a little smoggy, as you can see from the picture I took. But honestly, the air was better than Shanghai. The city has spent more than US$12 billion to improve air quality. Considering all the construction, the exploding number of vehicles and Beijing's location and climate (next to deserts, as opposed to Shanghai and Hong Kong by the sea), you can see that the government has been working hard.

But back to the language issue: Beijing is not as Westernized as Shanghai. Many service people still don't speak English. Hademen Hotel, where I stayed, is well-known for its traditional Chinese imperial furnishings. I saw more Western faces in the lobby and hallway than Chinese. But a bilingual sign in the bathroom caught my attention. A Chinese sentence reads: if you would like new towels, please place the used ones in the bathtub; if you need new disposable supplies (toothbrush, toothpaste, shampoo, conditioner and soap), please throw the used ones in the trash bin. That's pretty reasonable, right? But the English translation, as you can see in the picture, instructs guests to throw towels into the trash bin! That's really sloppy, to say the least.

Photo taken by Nina Ying Sun

Sometimes, I feel it's too harsh to expect China to speak good English. Just like how an American would brush up French before going to Paris, why expect the Chinese, representing a quarter of the world's population, to quickly pick up on a language that uses letters instead of square characters?

Western expatriates in China in most cases don't speak Chinese. They have translators and assistants. It's alright for business people. But an interesting comparison of journalists tells something: Western correspondents in China usually rely on their local language aids for gathering info in Chinese language. They can say Ni Hao and Xie Xie, but rarely can conduct an interview in Chinese. But I've not met or heard of a Chinese national working for China-based Chinese-language media from the U.S. who doesn't speak fluent English.

Just a random thought. But it's not an issue of Chinese versus English the global business language. It's the subtle interaction between all other languages and English.

Plastics News' Shanghai correspondent Lauren Hilgers was excited when she told me that she met a very interesting person at the recent Chinaplas event. She kindly wrote this following piece for my blog, succinctly portraying a Chinese industry veteran who bridges the East and the West:

Li Qin Ren's American colleagues rarely or never refer to him by his first or full name. To Russ Johnson and Carl Olson, the bespectacled general manager of China Array Plastics's Wuhan operation is always "Mr. Li." And Mr. Li comes up so much in conversation that I had begun to think of him as fictional--China's Mr. Rogers of manufacturing.

According to Johnson and Olson, Mr. Li can cook, he can run a factory, successfully negotiate China's bureaucracy and leap the cultural divide between the U.S. and China in a single bound. "What people don't know about Mr. Li," said Olson at Chinaplas, "is that he is a renaissance man in China."

After meeting Mr. Li, it is hard to think less of him. At 65, he has weathered sea changes in China's economy, going from work as a chief engineer at a state-owned company, to a few years doing research in the United States, to retirement in 2003 and resurrection in the plastics industry.

"I always joke that, although my past position was very high, I never had to worry about the whole company," Li said. "Now I work at a much smaller company, and I feel more pressure!"

It was Li's relationship with Johnson that brought him to plastics at this late stage in life. Li's previous expertise had been in the shipbuilding industry. When Johnson came to China in 1984, he met Li across a negotiating table. "In our company there were not many people who could speak English, so they asked me to do negotiations and interpretation," he said. The pair hit it off. When Johnson returned on trips to China, Li helped him source goods and ensure quality. When Li went to do research in the U.S., he thought, "Naturally, Russ is the one American I would like to know."

Li has helped Johnson navigate what Li sees as three phases of China's economy--the first negotiating with state-owned enterprise. "State companies are not so flexible, and these companies were defense industry companies so they will neglect other orders."

As China's economy opened up, Johnson began contracting with private companies, but ensuring quality was an issue. "Now is the third phase," Li said. "This is a wholly-owned foreign enterprise and we are operating according to international standards."

Li has been working with China Array since his retirement, but thinks the company should look to the future. "At first they needed a person like me, who has experience working in a manufacturing company," Li said. "But we need to consider the next generation."From left: Li, Olson and Li's daughter at Chinaplas. Photo taken by Lauren Hilgers.

As the Beijing Olympics torch was successfully relayed in New Delhi the evening of April 17 Beijing time, India's largest private enterprise and exporter -- Reliance Industries Ltd. -- made a toast to hundreds of its Chinese customers and industry friends at a Shanghai reception.

The company has been supplying PP, PE and PVC to Chinese processors for many years. With two representative offices in Shanghai and Guangzhou, Reliance also operates five duty-free warehouses along China's eastern coastline.

At the reception, the company announced that its experienced Shanghai chief representative, S. S. Naik, is returning to the company's Mumbai headquarters to oversee the resin giant's export business. Mr. Naik's successor is Mr. Soumen Bhattacharya, Country Head--China.

Reliance is one of the six Indian exhibitors at Chinaplas, down from nine in 2007. The numbers look incredibly low compared with the total of 1,800 exhibitors, given the close trade ties between the two booming economies.

Stanley Chu, chairman of the Adsale Group, said many foreign companies are represented at Chinaplas by their Chinese operations and therefore are listed in the China category. That may explain part of it.

In the past few days I've seen plenty of Indian buyers on the show floor, a good number of whom have registered with the show -- over1,000 according to Adsale.

India has maintained a healthy trade surplus with China in the plastics sector, a good chunk of it being resin. I wonder how much of that is generated by Reliance.

China's success story as a world powerhouse definitely wasn't a solo act. The economy has flourished in the past three decades with foreign investment, which, by governmental definition, includes money from Hong Kong, Macau and Taiwan.

Taiwanese businessmen were among the first to move factories to the mainland. Today, they are swiftly starting to shift to lower cost countries, in particular, Vietnam. Nevertheless, the indispensable role Taiwan has played and continues to play in the development of the Chinese plastics industry can't be overlooked.

That's why I give kudos to Adsale for planning a Taiwan-mainland pre-show conference for the 2009 Chinaplas. The one-day conference started in 2006 with a China-India theme and continued this year with a highlight on the cooperation between China and the United States. The Taiwan deal will be finalized in September when the Adsale Group leads a trade delegation to the Taipei Plas show. On a side note, the Taiwanese Association of Machinery Industry, organizer of the Taipei show, called off a press conference that was supposed to promote Taipei Plas at the Chinaplas show. Let's hope they've had more companies sign up than they can take.

Plastics News, for the first time, will exhibit at Taipei Plas this year.

Chinaplas, currently Asia's largest trade show for the plastics industry, debuted in Beijing in 1983. But it hasn't been back to its birthplace since 2004. And it's not going back in any time soon.

Why? Believe it or not, although the Chinese capital is all geared up for the 29th Olympic Games, it is not ready for the ever-growing Chinaplas show.

That's according to Stanley Chu, chairman of Hong Kong-based Adsale Group, the organizer of Chinaplas.

"Beijing doesn't have a venue large enough to hold Chinaplas," he said April 17, the first day of the four-day-long 2008 Chinaplas show in Shanghai.

Chu said Beijing's largest exhibition hall provides 125,000 square meters of exhibition space, while Chinaplas 2009 is anticipating 140,000 square meters of space.

On the site of this year's venue, the Shanghai New International Expo Center, temporary pavilions have been built in between the 11 modern, spacious halls to fit more products and people.

Chinaplas is returning to Guangzhou next year. It will take place May 18-21 in the China Import and Export Fair Pazhou Complex, which, according to Chu, is the largest fairground available in China and only slighter smaller than the Hanover Exhibition Center.

Beijing remains the economic center for northern China. and as the southeast (the Peal River Delta) and east (the Changjiang River Delta) get more expensive than ever, businesses in those regions are inevitably moving north and inland for more competitive cost structures.

You may think the location of a trade show shouldn't be a big deal, as people from all over the world fly to China for the plastics carnival. But it does matter to a country with such vast territory and diverse cultures. Just like how people from the New England wouldn't want to visit Houston in the summer, Guangzhou isn't the favorite destination for people from China's northern regions. But I guess, at least for the time being, the overwhelming advantage of foreign investment and plastic manufacturing in the South outweighs everything else.

Chinaplas is the largest plastics show in Asia. But how big exactly?

This year, the show features a total exhibition space of 132,500 square meters and nearly 1,800 exhibitors from 35 countries. Show organizer, the Adsale Group, said that the show's status as "number one in Asia and number three in the world(after K and NPE)" is "unshakable."

The latest stats show that 27,223 visitors attended the show on April 17, the opening day. Nearly 20 percent of them, or 5,118 people, came from outside of China.

Adsale also told the press that the electricity consumption of the show catches up to the normal power consumption of a Chinese town. Ten high-capacity generators were brought in this year and installed outside the halls, supporting the machines on display.

Latest recap of Chinaplas 2008:
Number of Visitors
April 17 : 27,223
April 18 : 25,300
April 19 : 13,331
April 20 : 6,307
Total : 72,161
Number of Overseas Visitors : 11,760 (16.3%)

This year's International Home and Housewares Show in Chicago featured an unprecedented collection of eco-friendly products. I hope you can get a feel of the green trend from the fresh photos I took at the March 16-18 show. Read my story Green Movement is in full force at 08 show for more information.

Perf Go Green Inc. of New York touted itself as the first to mass-market 100 percent degradable trash bags to consumers. The green-tinted, low density polyethylene bags have a shelf life of two years and will break down completely in a landfill in 12-24 months.

Perf Go Green also offers a unique dispensing system that's stored in the bottom of a trash can and dispenses bags one after another.

Design Ideas Ltd. of Springfield, Ill., launched a line of bath products made of EcoGen plastic, a copolymer known as polyhydroxybutyrate valerate, or PHBV.

Dirt Devil, a brand owned by TTI Floor Care North America of Glenwillow, Ohio, unveiled the industry's first cordless vacuums to receive the U.S. government's Energy Star label: the Dirt Devil AccuCharge hand (featured in the photo provided by TTI) and stick vacuums.

Casabella Holdings LLC of Blauvelt, N.Y., launched a line of dish drains, cutlery trays and soap dishes made of PLA.

Bissel Homecare Inc. uses recycled plastic in the brush block and parts of the solution tank of this Little Green compact, multipurpose cleaner.

Iris USA Inc. of Pleasant Prairie, Wis. showcased a recycling organizer that is stackable.

Hong Kong firm A&T International Co. touted biodegradable tableware and bags with a variety of materials including PHBV, a mix of 60 percent PP and 40 percent starch and natural materials such as bamboo and sugar cane.

Eastman Chemical Co. showcased bottles made of Tritan-brand specialty copolyester, which the company touts as being free of BPA.

Base Brands of Atlanta introduced water bottles that are made from a styrene acrylonitrile copolymer and prominently labeled "BPA-free," since the product is not made of polycarbonate and does not contain bisphenol A. The company promotes the message that people can use these colorful and attractive bottles to bring beverages from home to work, instead of consuming bottled water from vending machines. The SAN bottles come in packs of five, with an easy-slide base for refrigerators.

BRK Brands Inc. of Aurora, Ill., a fully owned subsidiary of Jarden Corp of Rye, N.Y., announced that it is phasing out PVC in its packaging and using recycled PET instead for its First Alert line of smoke and carbon-monoxide alarms. Photo courtesy of BRK Brands.

Umbra Ltd. of Toronto showcased desktop organizers--which resemble trash cans--injection molded with polylactic acid.

Umbra uses industrial scrap PP, plus 1-2 percent additives, to make degradable trash bins.

More degradable trash bins from Umbra with modern looks.

The trash bin is designed to hold two trash bags, divided by the center bar, one for recyclables and the other for non-recyclables.

If you've been to China and made some friends, you'll know that Chinese friends are nosy. They ask about your salary outright. My friends in China love www.salary.com and they use it compare their own income to their counterparts in the States.

I always tell them that the less labor there is to a job, the less of a gap in income between the two countries. Investment bankers in Shanghai get paid as much as their counterparts in the U.S. But injection press operators and street sweepers in China get paid much less than their American counterparts. And those labor-intensive jobs have been filled by migrant workers in the past three decades when the labor-cost advantage enabled China to attract foreign investment and prosper as an export-led nation.

But China may have come to the point where its hiring model for manufacturing and low-end service industries is in need of an overhaul. Maybe manufacturing jobs will eventually have to be localized and pay more.

That way, the kind of tragedy that struck Shenzhen-based plastics recycler Longfei when a fire broke out and killed 15 migrant workers sleeping in a factory attic won't happen again.

That way, there won't be the transportation frenzy like the one this past winter when snowstorms hit southern China just as millions of migrant workers tried to go home before the Chinese New Year.

That way, a natural disaster won't torture so many more elsewhere -- right now, many of the families of the migrant workers who were employed in Chengdu when last month's earthquake and subsequent aftershocks struck are drenched in sorrow; many migrant workers who are from Chengdu but were working in other locations also are suffering, because when the tragedy hit, they were not with their families. What can be more heartbreaking than that?

I can't say if I agree with Zuisetsu Su's prediction. But for quite a while, I've been wondering how long China's migrant labor-based economic boom can last.

There are plenty of figures, models and analysis from economists out there. I just happen to believe that China's migrant labor waves will die down as a result of what's changing in people's minds.

I'm talking about values and beliefs.

Among the emerging economies, be it India, Vietnam or South America, has any other country seen anything as phenomenal as China's population of 100 million migrant workers who work out of town all year round?

Most of them work laborer jobs that local city residents wouldn't want to take. These adults work at least six days a week, eat at the factory-run dining hall and sleep on bunk beds with dorm mates. They only see their spouses and kids once a year, around the Chinese New Year when they return home for the holiday. With their humble wages they will never be able to afford a house in the city nor realize a costly education for their kids because, being migrant workers, they are non-residents. Therefore, year after year, they never dream of settling down. They work hard and spend little during the year; they bring savings home in the winter to support their family's life in the rural areas.

Many Western friends asked me: "How do these migrant workers manage to keep their marriage and family intact?" I don't know how to answer that. I guess when one struggles to fill the stomach, other needs are pushed back. Migrant workers' lifestyle seems so against human nature. And to me, it's simply not right.

The awareness of life values has awakened in China along with the rising gross domestic product and living standards. The young generation in rural and inland areas would rather stay home; and more local manufacturing is starting in those regions. Those who leave town do so to change the path of their lives. They want to stay and blend in to city life.

Hence the human resources challenge currently facing China. On the one hand, millions of college graduates can't find jobs; on the other hand, factories have a hard time finding laborers.

I was chatting with Zuisetsu Su -- an executive at Japanese automation equipment maker Harmo Co. Ltd.'s Shanghai branch office on the last day of Chinaplas. We first talked about the market's reaction to China's labor cost hikes; then he went on with a thought-provoking personal projection of China's future.

"Labor shortages will end in a few years," he said. I disagreed, pointing out that wages continue to rise with strong legislative backup from the government; many middle-aged migrant workers are returning for good to their hometowns; and young people in the inland regions are not as enthusiastic about the lifestyle of a migrant worker.

That's exactly where the problems are, Su said. He was referring to the geographical imbalance of China's economy, with its clusters of manufacturing around a small number of large cities and ports.

By 2010, manufacturing will be more spread out across China, narrowing the gaps between regions, Su said. He believes the current manufacturing hotspots will see factories shift to areas with sufficient and affordable labor resources.

"What do you think is sustaining the extremely high real housing prices in Shanghai, Beijing and Shenzhen?" Condominiums in midtown Shanghai sell for at least 20,000 yuan per square meter (about US$265 per square foot).

It's the supply-demand relation of clustered population and limited space. Just like what happened in Tokyo in the 1990s, Su said, Shanghai and Beijing will also see their real estate bubbles burst soon. "That will bring down prices all over the board."

A Beijing native, Su moved to Tokyo as a teenager and lived there for 14 years before relocating to Shanghai.

Cheers! The local governments in China have become a great news source for industrial expansions and other business information for me.

No, I didn't bribe them. Nor did I hack into their databases.

All I do is monitor their public information Web sites like nobody else.

It has taken a decade for Chinese local governments to not only have vendor-built neat Web sites but also to regularly update them with useful information, from construction approvals to training for unemployed residents.

The fact that you can now submit a request, check on its status and receive approval all online makes the government much more open, efficient and transparent.

Government-backed local media are just as helpful to me. They are eager to write about the government's achievements: foreign investment, construction, exchange programs, etc.

Take this report, first published by Tianjin Daily.

It reported that on May 19, two dozen local officials visited Columbus, Ohio-based Ashland Inc.'s new polyester project in Tianjin and provided on-site consultation and approval. "The on-site services laid the groundwork for Ashland's 30,000-metric-ton unsaturated polyester plant," the news said.

The story also gave details about the project that even Plastics News' latest update on Ashland's China expansion didn't include: The factory is 65,422 square meters, total investment is US$40 million and the project is scheduled to go on stream in July 2009.

Isn't this nice?

A local government-owned newspaper also reported that China's pipe giant Liansu of Foshan, Guangdong providence, has inked a 400 million yuan deal on a plastic pipe production base in Changchun, Jilin province. Liansu refused to talk about it when I checked with the company at Chinaplas last month. But industry insiders told me that the expansion makes perfect sense: As transportation costs rise, a factory in the northeast of China will greatly supplement its headquarters in Southeast China.

So far, I haven't seen coverage on Liansu's new project anywhere else. I'm waiting to see how it plays out.

The sudden change in China's visa policies -- more complicated procedures and stricter approval process -- is certainly frustrating Western business travelers.

Just as the U.S. tightened its borders after 9-11, it appears that the Chinese government is trying to strengthen national security for the Olympics. Usually, such precautions are deemed a legitimate course by the international community. Who wants to see what happened in Tibet repeat in other regions on China's territory? Who wants to see the tragedy during the 1972 Olympics in Munich -- where eleven Israeli athletes were taken hostage and killed -- to repeat?

What really has caused the grudge is the disruption of easy, convenient Chinese visas. And the changes weren't communicated effectively in advance.

But, on the flip side, do you know the procedures a Chinese person must go through to get into the U.S.?

For starters, the U.S. embassies in China change their rules often. That's why Chinese travelers check with the U.S. embassy and State Department Web sites before they board a plane to America.

And did you know that Chinese citizens can't even get tourist visas to the U.S.? The situation is changing somewhat this summer as the U.S. starts accepting Chinese tour groups -- but still not individuals. Why loosen the control? Because the estimated per-person, per-visit consumption of a Chinese tourist is $6,000. That's good tourism revenue.

Did you know that Chinese citizens must attend a personal interview session at one of the five U.S. embassy/consulate locations in China to get a visa? But first they have to make an appointment for the interview weeks, or even months, in advance, by phone. Not only does the phone call costs nearly 5 yuan a minute (a normal long distance call in China cost about 0.30 yuan per minute), but often, it's unpredictable when the appointment center will release time slots on which days. So one needs to call again and again to get an appointment on a particular day.

Once visa applicants arrive at the U.S. embassy/consulates in China for their pre-arranged appointment, they must still wait at least two hours in the waiting hall -- sometimes standing in line outside the building in 100 degree weather.

Do you want to know how many documents it takes a Chinese citizen to get a U.S. business visa? Bank statement, real estate document, business license, pay stub, tax document, personal resume, employment letter, marriage certificate, wedding photo ...

Do you even want to know how many Chinese students with full-scholarship packages from prestigious U.S. schools are turned down U.S. visas every summer?

Visa policies are supposed to be reciprocal. But the Chinese rules have been bent to welcome visitors from the West, probably with heavy consideration for tourism revenue and foreign investment.

In spite of the current policy change, I do believe things will return to "normal" after the Olympics. After all, money talks, in both ways.

As China's export markets down and domestic buying power up, demand for packaging is rising rapidly. Western companies are going after the growing market, including the Austrian packaging firm Alpla Werke Alwin Lehner GmbH & Co KG.

According to Hefei Evening News, Alpla broke ground for its second factory in China on May 16. The new plant, located in Hefei, Anhui province, will supply packging to Unilever and L'Oreal. With an initial investment of US$20 million, the factory will start with annual capacity of 300 million plastic bottles. Alpla has a packaging plant in Tianjin as well.

by Plastics News editor Robert Grace

The Beijing Olympic torch protests appear to have triggered some fallout that is negatively impacting foreigners trying to travel into China for business or pleasure. One would expect that China would be lowering the barriers to entry and trying to put on a happy face for those wishing to enter the Middle Kingdom.

But various sources suggest that ever since the torch protests in Europe and elsewhere gained a lot of Western media attention, Chinese authorities have implemented much stricter visa regulations, to include demanding new layers of documentation and pretty much shutting down the issuance of the popular one-year, multiple-entry visas that used to be relatively easy to secure. We hear that even Hong Kong residents are being put through extra paces to go to the mainland.

Some of the new rules (though it is difficult to ascertain how widely or evenly they are being enforced):

All travelers need to provide a copy of a bank statement with their name on it, apparently to prove they have enough money to avoid becoming destitute and assuming permanent residency in the slums of Shenzhen;

Confirmation of a hotel booking for your entire stay in China, and that confirmation must include the names of all occupants of a given hotel room (e.g. your spouse or partner, in addition to yours, if you are not traveling alone);

For a business visa, not only does one need a letter (on letterhead, or else it's not valid) from the organization making the invitation, but now that organization also must go secure for their own purposes -- and in person, we understand -- a "special visa notice" for that invitee from a local entity such as an office of the Ministry of Foreign Affairs, an Economic Affairs office, or the appropriate municipal entity.

If you are simply going on vacation, on a tourist visa, one now needs a letter from your employer stating that you will, indeed, be on vacation in China on the dates in question.

This is all in addition to the usual stuff, i.e. a valid passport and appropriate photo, a signed China visa application form, a copy of your travel itinerary that shows the flight has been paid for, etc. Multiple-entry visas cost no more than single-entry visas, but now seem virtually impossible to get. As a result, someone wanting to travel more than once into mainland China in a certain period of time gets to go through this lovely process each time (for a fee, of course).

Let's hope this all dies down once the Olympics pass. So much for rolling out the welcome mat!

"More than half of factories in southern China are falsifying payroll documents!"

"Many even create Potemkin factories.... Around the corner is a 'shadow factory' that produces the same goods under much less wholesome conditions."

"There is even a cottage industry of 'falsification engineers' in China--consultants who specialize in doctoring payroll records and coaching workers to create a fiction of compliance with a Western buyer's code of conduct."

The above statements are from Alexandra Harney's latest viewpoint for Plastics News' sister publication AdAgeChina, How to work with Chinese factories without getting burned(registration required). She is a China-based journalist and author.

What's more sensational than the bold statements about unethical business practices in China, is her suggestion that, instead of waiting for Beijing to improve law enforcement, Western multinationals can be a large part of the solution to the problems--whose consequences include costly product recalls, falsified documents and worsening pollution.

Here are the steps Harney suggested taking:

1. Acknowledge that understanding what's happening in the company's supply chain is not simply a matter of risk management or good corporate citizenship; it is a core business issue and a valuable competitive advantage.
2. Build frank, long-term partnerships with Chinese factories, rather than moving orders quickly from one plant to another.
3. Take a field trip at least once or twice a year.

But the most interesting advice was:

Schedule a visit to one of your suppliers, but arrive quietly the night before your appointment, perhaps with a Chinese colleague. Instead of having dinner at the hotel restaurant, eat near your factory and spend time with the locals. Ask them: What's the average monthly wage in this area? Are wages going up or down? What time do most people get off work? What is considered the best factory to work for, and why? Have there been any problems in any of the factories recently, fights or disagreements?

Ask motorcycle drivers that work near your supplier about the hours your factory keeps its lights on, and whether they see a lot of traffic between your supplier and others in the neighborhood.
When you meet the factory manager the next day, ask him the same questions and compare his answers to what you learned the night before.

Sounds like some good advice from a real China expert. However, don't assume the locals and motorcycle drivers -- if there are any -- really know the answers to your questions, even if they provide you with information. Be aware that Chinese Culture 101 dictates that, out of politeness, Chinese people won't tell you no. If the motorcycle driver isn't sure about the hours of the factory, he will probably give you an answer anyway, just to complete the conversation nicely.

So, like any due diligence work, talk to multiple sources with different backgrounds and interests.

Words can't describe my feelings about the May 12 earthquake that has killed at least 15,000 so far, erased some Sichuan localities from the map and affected another dozen provinces across China.

Early Monday morning, EST, China's Xinhua News Agency reported 107 casualties in the quake. I called as many people in China as possible until 8:15 a.m., when I had to leave home for work. Everybody I spoke with was fine.

I was in a meeting from 8:30 to 10:30 a.m. When I came out, colleagues asked me about the quake and I said about 100 people died. But then on the Internet, the death toll exploded to 9,000 by around noon. I was appalled, to say the least. I sent a group e-mail to all my Chinese friends outside of China--in North America, Europe, Australia, and the rest of Asia, asking if any of their friends or families were in the affected areas. I received a dozen brief replies from friends saying that their relatives were in the region, but, thank God, they survived in one piece.

Chinese who are living overseas are raising money for the quake. Houston Rockets' basketball center Yao Ming, alone, has donated 2 million yuan from the U.S. In the Cleveland-Akron area, where I am, Chinese student and scholar associations at area colleges and universities are taking the lead, followed by other regional organizations.

Among Western media, Wall Street Journal has presented in-depth coverage, especially in this article: China Earthquake Exposes a Widening Wealth Gap.

A friend of mine who works in the financial district in Pudong, Shanghai said she rushed out of the shaking building where she was working and saw, on the nicely mowed lawns between the new, well-built high-rises, a group of white collar workers filling out their life insurance forms -- right there on the lawn. But how many of the 15,000 (incomplete stat) small town residents and farmers who have died in the quake had life insurance? How many of the 64,000 injured (incomplete stat) have health insurance and disability insurance?

I also blame the poor quality of buildings in rural areas and small cities for the horrific damages. But according to an architect friend who has worked in China, Australia, France, Canada and the United States, even Shanghai and Beijing have plenty of sub-par buildings. "They build fast and cheap, not so strict with shock-resistance performance," she said.

Rumor has it the Water Cube Aquatics Center in Beijing already has a few leaking points ... I hope it's just rumor.

Most Westerners probably know Sichuan only for its world-renowned spicy cuisine. But Sichuan people are also known in the Chinese community for being optimistic, strong, hard working and ready to help others. Just hang in there. With help from all over the world--starting with an 800 million yuan relief fund raised in the first two days after the quake, I hope Sichuan recovers soon!

Pray for China. Pray for Sichuan.

P.S.: The Taiwanese government is donating 2 billion Taiwanese new dollars (452 million yuan or US$65 million) for the quake areas. This marks the first time ever that the Taiwanese government has made a donation for the mainland. In the plastic industry, Taiwan's Formosa Group is donating 100 million yuan and Hon Hai Precision Industry Co. Ltd. 60 million yuan.

Not so long ago major U.S. airlines were scrambling for passes to fly to China. Now, some of those airlines that "luckily" obtained China routes from the U.S. Department of Transportation want to halt services.

Taking the lead are US Airways Group and Northeast Airlines. Both have received permission from the DOT to suspend some of their China-bound flights without losing their rights to operate to the region in the future, said a Bloomberg report.

Through-the-roof fuel costs are blamed for the step-back.

US Airways also plans to delay the launch of its Philadelphia-Beijing service to March 25, 2010. United Airlines said in May that it will delay the launch of service between San Francisco and Guangzhou to June 2009.

In my experience over the years, it's become a luxury to sit next to an empty seat in the main cabin on direct flights between the U.S. and China (same thing with domestic U.S. flights). Planes are getting fuller, airfares higher, and meals simpler. Now should we start to worry about securing a seat?

We've seen plenty of press coverage about China's new labor contract law and its attendant rise in wages and improved benefits packages. But it would be naive to believe that Chinese workers now feel happy and secure. In reality, they are vulnerable and often thrown into unusual situations -- such as arriving at work to find that their bosses are no-shows.

Such was the case for more than 1,000 workers of Xinyao Techonology Co. Ltd. -- a plastic molder in Shunde, Guangdong province -- who responded with extreme action when company management didn't show up for work last week, according to local media. Rumors spread quickly among the workers, who had not yet received their June paychecks, and they believed that the owner was unable to pay them because of a huge loss in the stock market.

To make up for their overdue paycheck, 1,000 day-shift workers scrambled to collect raw materials and equipment from the factory.

Local police rushed to the site, stopped the mad scene and retrieved the items that had been removed from the factory. Labor authorities are now on the case and in talks with the owner.

You may wonder why workers didn't seek legal protection instead of looting the factory. I see it as a manifestation of people's discontent and lack of faith in the legal system. In order to change that mind-set, the government will need to resolve all labor-relations cases in a consistent, fair and effective manner in the years to come.

A Chinese researcher at a state-owned energy think tank said that in the future the amount of energy it takes to produce a product will be found on product packaging.

Mr. Jiang Kejun said the research institute in Beijing is working to analyze the energy consumption of products used in people's daily lives. "For example, the amount of energy used to make an A4 size sheet of paper is about 0.1 kilowatt-hours," he told a Chinese publication.

Well, that energy tag may help plastic bags regain some share lost to paper bags, since the production of paper bags uses more energy than plastic bags.

But, researchers, especially those who advise governments on policies, should really look at the whole picture rather than one single parameter. What about carbon footprint? What about reusability? What about recyclability?

And, how much energy does it cost to produce the energy tag, starting with figuring out the amount of energy in every commodity? Will it be worthwhile?

I have one bachelor's and two master's degrees -- none is anywhere near science and technology. But converting solar energy to mechanical movement without any aid but a plastic motor sounds really awesome to me.

Nanowerk LLC of Honolulu, Hawaii, described the significance of the plastic motor in a June 20 release: for the first time, researchers have succeeded in amplifying the minuscule change in structure at a molecular level caused by an external stimulus (light) to a macroscopic change through a cooperative effect of liquid crystals. The polymer used to make the photomechanical device is liquid-crystalline elastomer, combing both properties of liquid crystals and elastomers.

The U.S. Department of Commerce has reached a decision on a dumping and subsidization investigation of laminated woven sacks from China.

In a June 19 release, the International Trade Administration said the government determined that Chinese producers/exporters have sold laminated woven sacks in the United States at 64.3 to 91.7 percent less than normal value and received net countervailable subsidies ranging from 29.5 to 352.8 percent.

That's preliminary success for the petitioners, the Laminated Woven Sack Committee and its individual members: Bancroft Bag Inc. (La.); Mid-America Packaging LLC (Ohio); Coating Excellence International LLC (Wis.); Polytex Fibers Corp. (Texas); and Hood Packaging Corp. (Miss.).

The International Trade Administration will issue its final injury determination on or about July 31. Depending on the ITC's findings on the imports' injury to the domestic industry, the government will decide whether or not to issue anti-dumping and countervailing duty orders.

Bharath Srinivasan is the Guangzhou Chief Representative of Mumbai-based Reliance Industries Ltd. His response to my "Chinese labor market revolution/evolution" series offers an interesting perspective, comparing two of the world's fastest growing economies. Here's an unedited version of his writing:

We can attempt to put migrant worker demographics in China into perspective. The real demand for the workers would have come during 1990-95 as the country was coming out of re-adjustment. I presume the workers would have been around 25 to 30 at this time (Born in 1970s). Now, 15 years later, they are still in mid 40s having a minimum of 15 to 18 years of working years more (may be more considering the superior health of Chinese).

One large plastics factory owner in China told me recently that the new labor law could lead to release of labor from smaller factories that cannot meet the norms and bring more wiling workforce with some guaranteed benevolent employment. I see this kind of readjustment within the Industry cluster a source of labor for the profitably running factories to aid any expansions.

Movement to West could be mainly in textile and Shoe Industries as Plastic manufacturers' set up is a lot more elaborate than the stitching units, I guess. However, such Industry movements will attract that section of migrant population closer to their hometown, provided the moving enterprise is willing to retrain those who do not have the relevant skills.

Hence, for the plastics industry, I see secure supply of workforce in two ways: (1) Existing labor which has some time to go & (2) Readjustments from closures of small units within the industry segment. Yet infusion of new workforce is still an area of concern as is the case in large rapidly developing countries like in India.

The industry spread is all across India, exceptions can be in states where there was what you might call 'poor investment climate'. The reasons are simple. The focus of the Indian Industry was to satisfy domestic needs unlike the export-focused Chinese Industry. Hence they need not be located close to the ports. Secondly, any Industry had to rely significantly of self generated power as all provinces are equally power starved. Hence, most industries generate their own power, which means the engine for the Industry can be moved to any location. Thirdly, labor was available in all locations. India has 80 percent of Chinese population living in 30 percent of the land area. The population density is high in most places.

Interestingly however, there are widespread cases of 'migrant workforce' from states like Bihar, Rajasthan and Orissa in the Plastic Industry. These states have seen the least development in the past 60 years of Indian independence with virtually no new Industry in these places.

However, unlike China, which continues to be a manufacturing economy, India has moved into a 'service economy' in a big way. Most of the young graduates prefer white collar jobs which are also available in abundance. The recent flash of excellence displayed by Indian companies in manufacturing has mainly been in automobile, its ancillaries and the steel Industry which largely supports the automobile industry. Hence, finding a blue collared workforce for other industries in India is a lot more difficult than in China. I should also add, the productivity and work culture in India has much to be desired in comparison to China.

Hence, I might conclude that China is in a much better position than India in terms of labor right now.

The plastics industry in Vietnam appears to be doing well, just looking at the export figures. The country has earned an estimated US$345 million from exports of plastic products in the first five months of this year, up 31.9 percent over the same period last year, the Ministry of Industry and Trade was quoted as saying in a Nhan Dan Online story.

But the growth of dollar amount doesn't necessarily indicate an increase of volume. In fact, prices of plastic products have gone up across the board, both for exports and Vietnamese domestic market. The Nhan Dan report cited a 10-30 percent price hike of such plastic items as schoolbags, raincoats and children's toys. And the price increase of finished products was a result of rising resin costs. Prices of PP, PVC and HDPE increased US$30-50 per metric ton in May compared to April and up 23-25 percent compared to the same period last year.

Since the Vietnamese plastics industry largely relies on imported resin, increased spending on resin imports is the price it pays for export growth of processed products. Also taking into account inflation and labor wage hikes in that country, the bottom line tells a different story than sales.

A U.S.-based consultant called me, asking about the validity of setting up manufacturing of simple plastic products in Asia -- such as China, Vietnam, Thailand, Malaysia, etc.

I've been promoting the idea of keeping plastic manufacturing, especially those that can be automated, where the market is. From a pure business viewpoint, it's quite simple: resin prices have been pretty much globalized with regional fluctuation; fuel and transport costs continue to rise; labor cost advantages and preferential policies are bound to change in emerging economies as they become richer. On top of these factors, of course, there are political and economic uncertainties of investing in a foreign country.

Take a look at Vietnam. The country's inflation tops 25 percent, with food costing more than 40 percent more than last year. It is also suffering a massive trade gap and a falling currency.

Vietnam's neighbor, important trading partner and investor -- China -- is seeing Chinese firms facing difficulties across the border.

According to Yang Zhen, chairman of the Business Association of China in Vietnam, who was quoted in a China Daily report, Chinese-invested companies in Vietnam have been suffering income losses as the dong depreciates, credit tightens, raw material and labor costs rise. The head of a plastic bag manufacturer from China was even attacked by local workers during a strike and had to hide in a government hotel, the paper reported.

If the Chinese economy is a large vessel, then the Vietnamese economy is a small boat. The latter's GDP is about one fiftieth of the former's. That's why China is more able to weather storms. However, when the big ship gets on the rocks, the damage and losses will also be much severe than with a small boat.

I like Morgan Spurlock's reality TV series "30 Days," in which he and other subjects live for a month in a way that's outside their comfort zones, such as living on minimum wages. If I had the resources, I'd tweak this concept and produce a TV program to showcase people's lives in China. Here's a brainstorm of possible episodes including the fictitious Mr. Wang:

1. Viewers get to watch Mr. Wang as he parts with his wife and son in a small village in Sichuan province and tries to find an entry-level laborer job in the plastics manufacturing industry in a big city. Since China's labor demand is outstripping supply, 30-something Mr. Wang with a high school diploma and no factory experience may still get offers. He decides to travel to different regions -- like Guangzhou, Shanghai, Tianjin -- and evaluate the job markets in different parts of the country. He compares pay packages, tries to get around the middleman, negotiates with big enterprises and small workshops, and insists on a legal employment contract. Trust me. It'll turn out to be eye-opener for both Western and Chinese readers. He may get tricked by the hirer on the contract terms. He may be asked to pay a job application fee for a bogus position. He may find out that Guanxi (connection) is crucial for landing a good job, and the connection can be made on the spot with a red envelop (containing cash of course).

2. In this episode, Mr. Wang takes a job. He starts a busy but simple life between his work station, factory dining hall and dorm. He gets basic training, tries to get along with his boss, coworkers and dorm mates, and observes the work environment: how safety measures are implemented, how overtime is tracked and compensated, how workers from the same province form cliques, etc. Since the free food provided by the factory is not great at all, he befriends the dining hall cooks for some perks. Since there's no TV or other entertainment options, every night, he and his seven dorm mates lie on their bunks telling stories about their families back home. When finally he has a day off, he gets out of the industrial park and explores the city, probably getting a taste of how expensive city life is and how he doesn't belong there. He inevitably encounters some cold faces and bad attitude from department store sales associates and restaurant waiters, who judge people on their appearance and accent... Back to the factory, he gets tired of waiting in line for the public phone in the dorm building and discovers that cell phone text-messages are more affordable than long-distance calls. He spends half of his first monthly paycheck, buys a pair of low-end, used cell phones and mails one to his wife.

3. In this episode, Mr. Wang quits his molding job and gets into the plastics machinery sales business. Viewers get to see how he prepares the first formal outfit of his life, learns to use the Internet, finds sales leads, and then hangs out with potential customers. Viewers will also see how he closes deals, and how kickbacks and other tricks work in China. He is lucky and successful, but not happy. As a salesman, he is expected to socialize everyday with customers, drink bottle after bottle of Chinese beer and shot after shot of liquor, and stay up all night in night clubs. He now sends more money home, but he doesn't want to tell his wife what his work is like. Over time, he finds himself making up things on the phone and subtle tensions arise between the couple.

...

Ideas and characters welcome!

When I was writing my July 31 post on China becoming the world's largest online community, I thought about India. In fact, the 4 percent penetration rate of the Internet does sound low for a country known for IT outsourcing, and, more recently, design and engineering.

I didn't include a comparison of the two countries in my posting, mainly because I wanted to keep the piece short and sweet.

But Business Week writer Frederik Balfour did in the "Eyes on Asia" blog, highlighting a pair of data sets: China's 19 percent Internet penetration vs. India's 4 percent, and China's 85 percent broadband percentage vs. India's 4 percent.

He received some harsh and outspoken comments, which criticized the writer's lack of understanding of the matter and framing up or exaggerating the China-India rivalry.

BW does like the China vs. India theme. It certainly grabs attention and invites bickering. A case in point was a July 22 BW article, "Why India will beat China". The story stirred up more than 500 comments -- some are intense and angry -- in a week.

If I can weigh in a little, China and India are on the top of the target list of Western companies' investment locations. So it makes perfect sense to compare the pros and cons.

But it can get writers into hot water to judge developing countries with their own set of values and underlying assumptions and then hope everyone else agrees. What is or is not desirable? Which goals are and are not priorities? These are all subjective value judgments.

And, local knowledge--understanding how a particular social system works--is vital. For instance, Balfour was surprised by how firewall -- used by the government to block Web sites, Web pages and even certain key word search that the government deems inappropriate -- doesn't discourage the growth of Chinese Internet users. I can help solve his puzzle: First, most Chinese people use the Internet for reasons other than political; second, the Internet has enabled Chinese people to talk more openly than ever and helped form an emerging public sphere in the cyberspace. Online firewalls can be frustrating, but not as almighty as in the off-line world. In other words, people who are used to tight government control in the day-to-day life aren't deterred by the presence of online police from using the Internet. It's that simple.

With a whopping 253 million Internet users, China has surpassed the United States to become the world's largest Internet user base.

The China Internet Network Information Center (CNNIC) released that number last week and noted that more than 80 percent of Chinese Web surfers use broadband, according to Xinhua News Agency.

The United States had an estimated 223.1 million Internet users in June, the Associated Press said, quoting Nielsen Online's data.

A July report from the Boston Consulting Group spoke highly of the quality of China's online population, which spends more time online than their American counterparts and is quicker to adopt new technologies.

"Many people in the West think that China is still early in its digital development. In fact, in many activities such as instant messaging and blogging, China is more advanced than the United States and other Western economies," Xinhua quoted Christoph Nettesheim, a senior partner and managing director in BCG's Beijing office as saying.

Baton Rouge, Louisiana-based chemical maker Albemarle Corp. is helping the Sichuan Fire Research Institute (SCFRI) to restore work by housing SCFRI's research projects at the company's technical center in Nanjing, Jiangsu province.

Several buildings at SCFRI collapsed or were seriously damaged during the May earthquake, and some testing equipment was ruined, a news release said.

Albemarle's Nanjing technical center is an official Flame Retardant Products Test Center certified by Beijing-based China Plastics Processing Industry Association. The center is providing SCFRI with testing and research support. This way, "the issuing of flame retardant certification labels will not be affected by the damage caused to the institute," the company said.

For polyurethane professionals and managers in Asia, UTECH Asia 2008 will once again incorporate PU China 2008, and it will all take place September 3-5 in Shanghai.

The biennial event attracted 7,654 visitors in 2006 and covered a variety of industries, including automotive, general engineering, aerospace, furnishing and bedding, building and construction, electrical/electrotechnical, footwear, textile, mining and medical/surgical applications.

Plastics News' sister publication Urethanes Technology International is a co-organizer of the event.

More information is available at www.utechasiapuchina.com.

It takes some imagination to connect the dots between the Beijing Olympic Games, a plastics factory in Guangzhou, an explosion and a Uighur separatist group called the Turkestan Islamic Party.

But the Turkestan group made such a linkage by claiming responsibility for four recent explosions in China in an online video statement transcribed by the Washington-based IntelCenter. The group threatened to target the Beijing Olympics scheduled to open next week.

One of the four terrorist attacks claimed by the group was "a July 17 explosion in a plastics factory in Guangzhou." However, Guangzhou police refuted the claim and said they had no record of such explosion in Guangzhou on the particular day.

Chinese public security officials denied the claims and said the other three explosions -- May 5 in Shanghai, July 21 in Kunming, Yunnan province, and May 17 in Wenzhou, Zhejiang province -- had no connections with terrorist activities, according to the Xinhua News Agency.

Chinese and foreign media have pointed out the poor production quality and the factual errors in the narratives. The Wenzhou incident was referred to with a wrong date. The video also mentioned "the eight Olympics cities in China," while in fact there are only seven such cities.

An official with the Guangdong Plastic Industry Association in Guangzhou told Plastics News Asia Bureau Chief Steve Toloken on July 28 that they were not familiar with any bombing or terrorist activity in local factories.

There was speculation in some media, including the Washington Post, that the Turkestan group may have been referring to a March 13 explosion at a Guangzhou vehicle repair facility and residential building that killed seven people. According to local media reports, that explosion occurred during an accident involving a truck delivering a large load of plastic caps or discs used in toy guns.

A Chinese vegetable vendor also claimed responsibility for the Kunming explosion via the online forums, who later admitted to the police that he made up the story to gain attention.

While denying the Turkestan group's claims, the Chinese government also is reinforcing security measures at Olympic venues and other public space in a number of major cities, according to various local media.

Maybe I'm making a mountain out of a molehill, maybe it's just a numbers game, but Shanghai's gross domestic product growth rate of 10.3 percent in the first half of 2008 is below China's national average of 10.4 percent.

Yes, the discrepancy is small. Yes, maybe other regions inflated their numbers.

But, Shanghai has, since 1992, maintained double-digit annual growth rates, which were always higher than nationalwide averages, financial magazine Caijing pointed out.

During the first six months, the securities industry made zero no contribution to Shanghai's GDP growth, and the real estate industry dragged the overall growth, the Caijing article also said.

Figures from the Shanghai government show a decline of investment in city infrastructure and industrial projects.

Where is Shanghai headed? Should we pull out of that market?

Not yet. On the flip side, Shanghai's export growth rate is still climbing, thanks to aggressive expansion into markets outside of North America and Europe -- Japan, Southeast Asia, Latin America and Africa. The strategy of global diversification may spare China from being hit hard by the economic downturns in the West.

Rising prices of food, energy and commodity materials across the globe are stretching consumer confidence thin. Auto sales in the U.S. dove more than 17 percent in the first half of 2008. Sales of new vehicles also dipped 2 percent in Japan during the same period. But growth remains brisk in China, topping 18 percent in the first 6 months.

But the pace of growth is slowing down slightly, compared to the 22 percent rate in the first half of 2007. Xinhua also reported that growth fluctuates vastly, as shown by monthly performances. Sales reached a record high in January but took a hard hit in February due to the Chinese New Year holiday and snow storms. March saw a beautiful rebound, but April was a month of adjustment. Sales in May declined again, impacted by the Wenchuan earthquake. The market finally regained growth momentum in June.

When asked about the regulatory issues of medical devices in Asia, a European speaker at Engel's recent Medical Days event in York, Pennsylvania, said outright that he has no interest whatsoever in Asia. He told the audience that North America and Europe are leading the market, and Asian firms will only later "copy products and do their own things."

He represented a German supplier of automation equipment used in high-end medical molding. That could be a reason for his lack of interest in Asia, since Asia mostly produces commodity medical products.

But that same reason translates to great opportunities for Western medical molders. Asia, including developed regions such as Japan and South Korea and developing countries like China and India, demands state-of-the-art medical devices.

A recent Medical Design article discussed the opportunities and challenges for entering the Chinese market.

To get started, take this piece of advice from the U.S. embassy in Beijing: "We encourage U.S. firms to participate in CMEF (China Medical Equipment Fair)." The embassy advises companies interested in exporting to visit www.export.gov.

An effective strategy for entering the Asian medical device market is to track down diseases to find niche markets. Japan suffers a lot of neurological disorders, and heart disease is rapidly growing in India, for example.

On the regulatory aspect, the article said, a roadblock to marketing products in China is the stringent product registration process, which usually takes about a year or more, depending on the type of product. But that's true for all foreign markets. If anything, the Chinese standards are lower than the Western ones.

Maybe the Indian plastics processors who fasted July 7 in Chennai could find a more healthy way to communicate with the government.

The dawn to dusk fast was to press the Indian government to provide better support for thousands of local plastics enterprises, including uninterrupted power supply.

"Entrepreneurs have been facing severe hardship, particularly in Mettupalayam indutrial estate for some time now due to frequent power cuts," S. Rajaganapathy, president of the Plastic Traders and Manufacturers Association said in a release, according to The Hindu.

It's unclear how many people participated in the fast. But the firms also hope to get reduced duty on imported raw materials -- 5 percent customs duty and 4 percent additional import duty.

Who could have guessed that nearly 700 Chinese workers would lose their jobs overnight in auto molder Progressive Moulded Products Ltd.'s recent layoff?

One-third of the 2,000 workers at the Concord, Ontario, factory were of Chinese descent, Chinese newspaper Ming Pao reported.

Since the factory didn't have a union, workers joined forces with representatives from the Canadian Auto Workers and held negotiations with the owner, who has agreed to pay wages up to June 2008 and health insurance until the end of July. Progressive also said it will give each laid-off worker C$1,500.

"It's difficult to find a job in Canada. Now the factory is closing, where can I get the money to pay bills and support my kid?" Ming Pao quoted one of the former workers, identified as Ms. Zhang, as saying.

Two American business professors lead a survey of Chinese workers and published some of the results in an article headlined Misunderstanding the Chinese Worker in the Wall Street Journal.

In a nutshell, the study found that the West's perception that Chinese workers are motivated only by salary may be outdated and wrong. It points out that "Cultural shifts in China have altered social networks, leaving some workers there looking to employers for a sense of affiliation," and "nonmonetary incentives such as training, time off and community building might help multinational companies attract and retain workers in China."

I chatted with some friends including a head hunter in Shanghai on the subject. I was told that multinational companies are no longer the only top choice for Chinese talents.

When Western companies first set up shops in China in the early 1980s, up until the mid- to late-1990s Chinese local employees at Western companies took pride in their income, which was higher than Chinese state-owned companies and domestic private enterprises by a large margin. That gap has since been shrinking, as Chinese state-owned and private companies catch up on compensation.

More importantly, the absence of an efficient social security and health-care system has made people realize that money doesn't bring a sense of security. "The average government employee's base salary is still lower than his/her counterpart with multinational companies," my head hunter friend said, "but you pretty much have zero pressure at work, don't need to work overtime and also enjoy all kinds of benefits and additional income." Typical benefits can be anything from overseas vacations to a monthly garment fee; gym passes to quarterly bonuses for working in summer (called High Temperature Allowance); right down to cash, gift cards and food items.

Most importantly, state-run company workers never need to worry about losing their job. Believe it or not, many Chinese are nostalgic of their "iron rice bowls" (an idiom coined for permanent, state jobs) that have been shattered in the three decades of market reform and economic development.

The single largest acquisition of a Chinese company by a foreign firm in Chinese history is likely to be pulled off by the world's largest beverage company. Coca-Cola Co. is offering to buy the China Huiyuan Juice Group, for $2.5 billion, about three times the current value of the firm based on its Hong Kong-listed share price.

Regulatory approval pending, Coke will buy all the outstanding shares, bonds and options of Huiyuan and take the company private. The French food company Groupe Danone owns about 23 percent of Huiyuan and American private equity firm Warburg Pincus 6.8 percent.

It's worth noting that Danone's journey in the Chinese beverage market has been marked with dozens of lawsuits with its Chinese partner Wahaha. Danone may still be trying to cope with the denial ruling by a Swedish arbitration tribunal in July.

Beijing-based Huiyuan said it dominates the pure juice market in China with 46 percent of market share. In addition to pure juice, the company also makes diluted juice, fruit vinegar, bottled water, nectar, etc. Huiyuan's packaging solutions include 1-liter and 1.5-liter PET bottles. The company told Chinese press earlier this year that it runs 15 PET aseptic cold-filling lines. And I found from the company Web site that Huiyuan makes PET bottles in-house with Sipa blow molding equipment.

It looks like that Huiyuan, with more than 30 factories nationwide, is stronger in northern China than the southern regions. But the company currently is setting up production in Guangdong province.

It's also interesting that Huiyuan's listed entity doesn't represent Huiyuan's entire portofolio. The concentrated juice business, for example, is directly owned by Huiyuan Beijing.

Links:

www.coca-cola.com

www.huiyuan.com.cn/en

www.danone.com
Courtesy of Huiyuan

The economic slowdown in the U.S. is weighing on China. Wenzhou, Zhejiang, one of the busiest export bases in China, reported a surge of contract breaches since last year.
Beijing-based China Export & Credit Insurance Corp. (Sinosure) told Digital Business Time that the dollar value of contract breach cases filed with the agency's Wenzhou branch reached $8.79 million in the period from March 2007 to February 2008. That's a 639 percent increase over the previous year. American buyers account for 75 percent of the total.

A very common trick buyers use is decline of shipment, Sinosure said. Consumer products are more likely to encounter failure of payment than other categories.

The new trend is definitely shaking the image of export businesses.

In the meantime, Chinese exporters also suffer from the depreciating dollar. Measured in U.S. dollars, Wenzhou's exports of footwear to the U.S. grew a mere 0.3 percent in the first half, but when converted to Chinese yuan, exports are shrinking.

These problems are not unique to Wenzhou. Rather, the entire export-led Chinese economy is facing challenges.

Will China be able to weather the storm this time? As we say, don't put all your eggs in the same basket. Although no other single country will demand as many goods as the U.S. did [and still does] in any time soon [perhaps China or India will catch up one day], there are still under-tapped markets for the Chinese to explore. And don't forget about China's domestic market. I wouldn't call it under-tapped, but it certainly presents potential, especially on the higher end.

In a family chat about China's bag ban, my parents all of the sudden asked me: "Who invented plastic bags? Did he/she have any idea that plastic bags would turn out to be such a controversy?" I guess they assume that I must be a plastics expert since I work for Plastics News. Too bad, I didn't have a clue.

I found some relevant info from the Internet but can't verify the validity. I asked around in the office and still don't have an affirmative answer.

I am going to call up some real experts to find out more. In the mean time, can anybody shed some light on this interesting question?

The answer is Nanjing Jinling Plastic & Petrochemical Co. Ltd., located in Nanjing, the capital city of Eastern China's Jiangsu province.

Nanjing Jinling was founded in 1955, became a subsidiary of Sinopec, China's largest petrochemical company, in 1982 and was merged into Jiangsu GPRO Group Co. Ltd. in 2004. It appears that Nanjing Jinling still has close ties with Sinopec -- the official sponsor of the seats.

The seats were blow molded out of polypropylene and feature two colors -- "China Red" and "Great Wall Grey," Sinopec said in a release. Engineers at Nanjing Jinling said the color names were coined by "national leaders in Beijing" with no detailed description, and it took the company months to develop the specific shades, hues and tints.

The PP material is highly flame-retardant with an SDR below 50 and is UV-resistant -- the color will not fade for at least three years. What will happen when the color starts to fade? The manufacturer noted that the seats can be easily recycled.

Nanjing Jinling recently revealed the timeline of the project to a regional newspaper, Jiangsu Fazhi:

December 2005: Nanjing Jinling received product requirements from the Beijing Organizing Committee for the Games of the XXIX Olympiad (BOCGO) and started the product development process, with an emphasis on ergonomic design.

August 2007: The BOCGO approved the design and prototype.

October 1, 2007: The company completed the molding of 80,000 seats in less than two months and started installing.

January 26, 2008: All 80,000 seats were installed, and the project was completed.
Photo courtesy of Nanjing Jinling

Not that long ago, in the 1950s, Mao initiated a nationwide campaign called the "Great Leap Forward" in China, and the slogan he coined -- "Catch up with and leapfrog and the U.K. and the U.S," which I've paraphrased -- turned the country into a dangerous mess of chaotic passion, deception and fraud. The campaign failed, of course, with a very brutal ending that was coupled with natural disasters, which lead to famine and cost tens of millions of lives from 1959-1961.

Decades have passed. But time hasn't faded the Chinese people's memory of that mad era. Therefore, when I saw that China is set to overtake the U.S. (see the original report from the Financial Times) in terms of manufacturing output, the first thing that came to my mind was, how will the Chinese people take it?

I checked Chinese media and online forums. Yes, there are expressions of pride and excitement. But an op-ed from China's government-backed English-language newspaper China Daily went beyond that. The article highlighted the challenges China faces, underscored the fact that China is still behind even the world's average level of industrialization (otherwise, it'd account for about one-fifth of global manufacturing given the size of its population), and stressed the new goal of sustainability instead of blind expansion of low-end manufacturing.

Those are fair, objective and constructive points. No one can argue about how much and how urgent sustainability is needed in China for the overall good of the world. I'm glad that China is examining its success in the right context with modesty and vision. That attitude alone is a huge step up.

I've been to the annual International Housewares Show in Chicago for two years in a row. Its organizer, the International Housewares Association of Rosemont, Illinois, just sent me an e-mail, touting some interesting materials on its Web site.

The one that interested me was "Manufacturing in Asia: Current reality and emerging trends," an audio-enhanced powerpoint presentation by Michael L. Hetzel, vice president/Americas of Pro QC International.

In the speech, Hetzel tried to bust the myth that the U.S. manufacturing output is dropping. The reality is that it's growing. I'm not sure if that applies to the plastics industry though.

Hetzel downplayed China's role as the world's factory, underscoring that China's industrial output is well below the U.S. output. However, according to today's Financial Times, China is set to overtake the US in 2009 as the world's largest producer of manufactured goods, four years earlier than expected, as a result of the rapidly weakening US economy. Global Insight, a U.S. economics consultancy, conducted the forecast.

Hetzel also questioned the belief that China is "the cause" of America's trade deficit, as the U.S. has a deficit with 13 of its top 15 trading partners.

Hetzel also stressed that the U.S. manufacturing output is going up in spite of the decline in employment.

But wait, he isn't promoting China as a sourcing destination. He made a long list of the challenges China faces and advised businesses to consider different sourcing options around the world.

The last slide concluded: "The U.S. doesn't import too much ... We export too little."

In addition, the Web site also featured a whitepaper on Doing Business with China, which has only one page of executive summary, and another 15-page whitepaper called "Manufacturing in Vietnam."

For some reason, the Vietnam article failed to recognize the sky-high inflation and currency crisis in Vietnam. The addendums have some useful information about logistics, including inland transportation costs. But the quotes were from January 2008, so don't be surprised if it's changed by now.

Some American expats in Shanghai once told me that "Things change so fast in China, it feels like three months in China equals a whole year in the U.S.," pointing out the fast pace of change in China's economy as well as other aspects of society. Very true. Therefore, be sure to take any China/Asia literature, be it business reports, books, or say, my old blog postings, with a grain of salt and do some research for the latest development.

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.

I'm not sure how many companies are bringing production back for pure patriotic reasons. That's a wonderful cause, especially if the move is financially sound. But most business people make those decisions exclusively through business considerations. The maximization of profits within legal boundaries -- isn't that what capitalism is about? By the way, when the Chinese finally got to embrace market economy and capitalism, they pushed the limits too much. That's why toxic products are getting out of their hands. What a shame.

Back to the topic of "winning work back to the U.S.," I would like to ask you to define "work." What exactly do average Americans want back? Jobs? Robots will take over the repetitive laborer jobs. Profits? Multinational corporations' profits come back to the headquarters anyway, and the margin will be lower because of higher costs. Taxes? Yes. Pollution? No. Morale? Yes.

I do believe some work should be on its way back. For instance, I use Calphalon cookware. The made-in-China ones are affordable, but they are not as good as the old American-made ones. I'd love to pay more and get better American-made pots and pans. That's right. The American consumers never asked the big corporations to move production overseas and ship back cheap goods. The real drive of this wave of globalization was the endless pursuit of bigger margins, not to pull third-world countries out of poverty.

It is time for the U.S. to rebuild its manufacturing excellence and competitive advantages. Middle class consumers around the world are happy to pay for good quality products like Swiss watches, English teapots, Belgium chocolates, German cars, French perfume, and Japanese robots. Neither China nor India is able to replicate these products to a comparable level. What are America's best manufactured products that are globally recognized and nontransferable? Perhaps this is where we should start to bring work back, and make it stay.

My managing editor Don Loepp's blog posting "Bringing work back to America" reminded me of my experience covering the International Housewares Show in Chicago in the spring.

The show guide suggested a new record of international exhibitors, but since I was the only Plastics News reporter there, I decided to make the domestic U.S. market and industry my priorities. So, I went after the American companies that have kept manufacturing in the States. At their booths, I had to say upfront that, despite my Asian face and accent, I work for Plastics News, serve the U.S. plastics industry and would like to write about how businesses can survive and thrive by staying in this country. You bet some of them didn't manage to disguise their confusion and suspicion. But as conversations went on, they trusted me and appreciated my effort.

The trend story I put together from that show, "Firms find U.S. market favorable", features at least one example of bringing outsourced plastic tooling and molding work back to America. Designer Philip Seldon got burned by a dishonest Chinese vendor and switched to a custom molder in the Midwest.

Is that concrete evidence that plastic manufacturing is flowing back to America?

In my opinion, this type of individual business failure doesn't mark the trend. Many more Western companies have had better luck for good reasons such as strict due diligence.

There could be so many different reasons for a company to move manufacturing (or outsourced work) back from overseas. To name just a few: 1) bad experience with vendors, partners, suppliers, local government, employees in China, 2) updated product portfolio and pursuit of short lead-time or customization, 3) good utilization of automation, 4) overheated competition from improving Chinese competitors, and 5) finding the made-in-USA label sells really well in China. I don't rule out legit reasons like being fed up with pollution and tainted food in China.

The overall rising costs in China, from wages to taxes and to utilities, are definitely in the spotlight. But does it make sense to pull work in China all the way back to America? To some extent. American businesses may have realized through the years, from observing work transfer first to Mexico and then to Asia, that no country will be low-cost forever. They may have decided to jump out of the business that depends heavily on cost and invest in real value-added products, things that the Chinese can't copycat in an economical way.

I guess silence must be contagious: Not a single English-speaking reader has yet shared his/her view of Chinese plastic companies. As an ancient Chinese ode goes, "I was given a papaya, and I give back a beautiful gem." In other words, I was really expecting some feedback that I can share with and inspire Chinese readers.

Let me share my two cents, though.

Companies that manufacture plastic products in China include three types: foreign-invested, state-owned, and privately owned. But it's really not that clear-cut or rigid. A big chunk of the foreign investment comes from Hong Kong and Taiwanese business people. Many state-owned enterprises are being privatized. Smart private business owners make their companies "foreign" by, for instance, listing a relative or friend who has foreign citizenship as the foreign investor. The "foreign" title used to bring tax and other benefits, and it still helps with brand building. Meantime, foreign joint ventures are increasingly bought out by one of the parties involved, and becoming either wholly foreign-owned or locally owned.

Foreign-invested companies still dominate China's export-led manufacturing. But the real determinant force of China's future plastics industry, I believe, is the privately owned domestic Chinese companies (I'm going to shorthand it as PODC) and the entrepreneurs behind them. It's a big, diverse group we are talking about, ranging from the very state-of-art facilities to the down-to-the-earth workshops.

Compared to their American counterparts, on the macro level, PODC firms' competitive advantages include: 1) relatively easy credit from official and underground sources, 2) a driven, affordable, and highly trainable workforce, and 3) relatively cheap infrastructure and lax regulations.

All three points are double-edged swords, though. With easy credit and an inefficient financial system, risky investments are made. Factories come on stream fast and go out of business just as quickly. Workers are used to being told to execute tasks, lacking innovative capabilities. Cheap infrastructure and loose law enforcement encourage the abuse of the environment, workers' rights, etc.

You may wonder why I haven't mentioned the low cost. Let's face it. Materials cost more or less the same everywhere. Labor cost is lower in China than in the U.S., but wages are rising faster than business owners would like. Especially at senior management and executive levels, the Chinese pay is not far behind the American pay. Utilities and pollution-related costs are lower, but they, too, will have to catch up soon.

The only way China can overcome its limits in natural resources and maintain industrial growth is through the optimized use of its human capital. A country that doesn't lack entrepreneurship, China needs to overhaul the business system to foster better ethics, mutual trust, long-term vision, fairness, transparency and regulatory enforcement (such as protection of intellectual property). It's the lack of all the above that smother innovative spirits and sustainable growth.

Now it's your turn to share your take on the advantages and disadvantages of Chinese companies in the global market. Also, feel free to rebut the Chinese views about U.S. companies.

Tell me if I'm not alone: I wonder why the Chinese readers didn't mention the transfer of manufacturing from the U.S. to China. My guess is that they don't really think about it. Mainstream Chinese media doesn't cover it that much. And when it does, the media mentions it as a macro-economic trend of capital seeking profits in the global setting, without the micro-economic, human-interest details about workers being laid off, families losing income and failing to pay mortgages.

What do you think?

Feedback from Chinese reader Neo Huang:

I worked on a project at my company's U.S. branch factory in March. I'm here to share some reflections:

1) Americans like to plan everything. So the testing I was going to had been scheduled two weeks ahead of time. But when I arrived, I was told that not all approvals were in place. It took two days of hard work to walk through the process. And the process will be just as confusing next time. Complicated protocols essentially are a form of bureaucracy. They were made to control risk and regulate procedures. However, they naturally become more complicated over time, just like computer programs in the movie Matrix. If we set risk control aside, American companies can not compete with Chinese private firms on execution and speed.

2) On the flip side, the maintenance of machinery in the U.S. is far better than in China. Forty-year-old machines still look like new. ... They base everything on facts and numbers. Even experts would not make assumptions without data. The Chinese don't have this type of mentality and communication means.

3) Most U.S. workers have been working in the same field for decades. They have rich experience and excellent skills. I didn't spend enough time with them to compare their innovative capability with young workers in China.

Chinese plastics firms are already global leaders in some areas including cost, efficiency and scale. They need to make a real effort in innovation and management. It may take 10 years to perfect management and 20-50 years to develop the innovative spirit and capabilities.

More from Chinese reader Mr. Li You of Nanjing Wellplas Platics Co. Ltd.:

In my personal view, there are two types of plastics manufacturing. One is pure plastic products such as basins and hangers, and the other type is plastic parts and components that go into more complex and value-added products. China obviously has advantages in the first type of products, which feature steady supply, large demand and sensitivity to price points.

I can give you some examples: a 90-metric-ton, second-tier brand injection press costs only 70,000 yuan (US$10,200); in the Yangtze River delta, the monthly salary for injection press operators is 1,000-1,500 yuan (US$150 to US$220), 2,000-4,000 yuan (US$290 to US$590) for injection technicians, 3,000 yuan (US$440) for a mold technician, and just 5,000 yuan (US$730) for a mold technician with ten years of experience. Isn't that far less than even unemployment benefits in the U.S.? That's why made-in-China products are so cheap.

However, the U.S. has a tremendous advantage in the second type of plastic products, leveraging other leading manufacturing sectors and industries. In this category, quality, delivery time and communication are highly valued, as well as local services like product design, drawing and prototyping. The Chinese plastics industry doesn't have these leveraging opportunities from domestic manufacturing sectors such as medical, aviation, biochemical, etc. Since Chinese firms can't even get in the door to supply these industries, they miss all the opportunities of growing with them.

I also would like to take the auto industry as an example. Twenty years ago, when Shanghai Automotive Industry Corp. started a joint venture with Volkswagen, making Santana-branded sedans, less than 3 percent of the parts and components were supplied by domestic Chinese manufacturers. Twenty years have passed. Today, China's fast-expanding automakers are bringing mold and plastics suppliers up to speed. That illustrates how different industries support and enhance each other.

I believe that eventually China will become a leading player in the plastics industry, but definitely not through making low-value-added products like basins and hangers. The best technologies always apply first in military supplies, medical, precision systems, etc. As these sectors develop in China, the Chinese plastics industry will eventually enter the high-end markets.

The present American plastics industry, perhaps, is the future of the Chinese plastics industry.

Your international business consultant probably has already told you that the key to foreign market entry is to know the competition. And you sure have read quite a few Westerner-authored business books about China or India, wherever your place of interest is.

But do you know what's missing? Sun Tzu, an ancient Chinese strategist, said in The Art of War:"Know yourself, and know the enemy." Understanding your own strengths and shortcomings is the first and the foremost. You may be amused:"Of course I know myself!" Not necessarily. In this globalized economy, the definition is given in relative terms and specific contexts.

All I'm trying to say is that different perspectives can help us locate ourselves and our competitors in the global market.

So, in the Chinese-language China blog, I asked readers: 1) What do you think are U.S. plastics firms' advantages and disadvantages; 2) What are the things North American companies do that are admired by Chinese manufacturers? 3) Do you think Chinese firms can eventually dominate in all areas of plastics product manufacturing? And if so, how long will that process take?

Here are some bullet points I translated from readers' responses:

There is no longer a technological divide between Chinese and American manufacturers. Chinese companies can have the most advanced, state-of-art equipment and technologies. But overall, the American plastics industry is more developed, with more mature technologies and management and higher-quality workers. After all, they've been in the race longer than the Chinese have.

To be continued.

Lou Zhongping, a 43-year-old businessman from Zhejiang province, manufactures a quarter of the world's beverage straws at his 400-employee factory, but he is not that proud. In fact, he says, "If I were given another chance, I would stay sway from this business."

A feature story from the 21st Century Business Herald described the hardship Lou is going through.

Lou's straws sell by the metric ton, which breaks down to be about 0.008 yuan (US$0.001) per straw. Of that price, half had being going into resin cost, but now that percentage has risen even higher because resin prices went up more than 30 percent since last summer. Lou's factory uses 30 metric tons of polypropylene every day.

To cut costs and improve efficiency, he modified the 60 extrusion lines and implemented a heat-recycling system. But that's just not adequate to maintain margin.

In order to minimize negative impact of the inflating yuan, Lou only approves contracts with cycles shorter than a month-and-a-half.

Lou also is determined to diversify risk and limit large clients. "We can't let a single client take up more than 3 percent of our entire sales." It's easier to raise prices with smaller clients.

Thanks to the dragging U.S. economy, Lou's U.S. sales have shrunk by a third. Lou decided to switch his focus to the domestic market. The Beijing Olympics gave the market a lift, he said. Beverage straws were used to make a handle/holder for small national flags.

"The largest market is right here in China," Lou concluded with a relatively upbeat spirit.

Nevada-incorporated Airdex International Inc. is touting the "world's lightest pallets" in China and the Asia-Pacific region. The company made headlines in mainstream Chinese media, presenting a pallet model that weighs just 3.5 kilograms (7.7 pounds) but can hold up to nearly 5 metric tons (11,023 pounds).

Together with its Singaporean partner Broadway Industrial, Aidex has produced about 100 million such pallets in factories in Shanghai, Suzhou and Shenzhen for electronics makers like Hewlett-Packard and Toshiba.

By manufacturing in China, the company hopes its light pallets can replace the 12- to 25-kilogram wooden and plastic pallets currently in use by Chinese air freight companies.

If Shanghai ships out 100,000 Airdex pallets to Europe instead of wooden pallets, the company claims, emission of CO2 will be cut by at least 730,000 kilograms.

What materials are the world's lightest pallets made of? I found the answer from Airdex's Web site: expanded polystyrene (EPS) in the inside and high-impact polystyrene (HIPS) on the outside.

Airdex has manufacturing facilities in the U.S., China and Malaysia.

Despite slowing car sales, China's auto suppliers are maintaining decent growth and making new investment.

The auto supply industry increased its sales by 32 percent to 368 billion yuan and profits by 37 percent to 25 billion yuan in the first five months of this year, according to the National Bureau of Statistics. The rates are lower than last year, but still strong.

In the meantime, investment is still flowing into the auto parts and components industry.

State-owned Dongfeng Motor Group Co. plans to build a large-scale production base for recycling parts. The company is putting in 200 million yuan and hopes to start production in three years. The base is expected to annually recycle 50,000 used vehicles, reprocess 100,000 metric tons of materials, and manufacture 100,000 sets of parts and components using recycled materials.

China's Huaxia Times reported that more than 3 million vehicles end up in junk yards every year. Chinese authorities expect the auto industry to recycle 90 percent of all automobiles and at least 80 percent of the materials by 2012. The effort will help protect the environment and better use resources, industry insiders said in the report. But obviously, recycling will also be an effective way to reduce costs or at least offset rising production expenses in China.

Another expansion plan came from Taiwan Lian Chen Metal Manufacturing Works Co. Ltd., which is investing US$25 million to move its automotive mold center from its headquarters to Qingdao, a coastal city in Northern China. Having been in business for 55 years, Lian Chen is believed to be a major supplier to Ford. According to The Peninsula News, the project will be completed by 2009 and is expected to achieve 1.2 billion yuan in sales in the first year. The company said that the center will mainly supply five clients, including Beijing Benz-DaimlerChrysler Automotive Co. Ltd. and BMW's joint venture in Shenyang.

While Dongfeng's project illustrates the importance of recycling and cost-reduction in China, Lian Chen's plan unveils great potential of higher-end auto parts in China.

After a couple of years writing stories about China's growth rate slowing down, today I'm here with a real "decline" story.

China's export of processed plastic products dipped 1.4 percent in the first half of 2008, according to latest data from the China Customs.

The Customs noted a few important factors in play: the cutback of export tax rebate last summer, rising resin and logistics cost, rising wages and stricter labor laws, the strengthening Yuan, etc.

The agency also stressed that the economic downturn in the U.S. has directly impacted demand for Chinese manufactured goods. To support the claim, China exported $2.17 billion worth of plastics products to the U.S. in the first six months, 7.9 percent down from a year ago.

But demand from the European Union has been stable for Chinese exporters, with a 0.9 percent increase to $1.44 billion. Japan's imports from China actually climbed 7 percent, but the sheer volume $810 million is far less than the U.S.

Obviously those who export processed plastic products from China include foreign-invested companies, privately owned firms and state-owned enterprises. SMEs suffer the most from the slowdown, with a 15 percent drop. Foreign firms' export total decreased just 1.2 percent decline, while Chinese private companies managed to expand their export by 8.8 percent.

Foreign ownership still owns the lion's share of China's plastic export. But if the trend reflected in the first half of this year continues, we may see in the future that domestic private companies will take over the top position, which I truly believe, will contribute to a healthier structure of the Chinese economy.

Sales of new passenger vehicles in China are indeed growing at a slower, still double-digit, pace now, but the rapid expansion of consumer base in the past decades has established a sizable auto aftermarket that offers opportunities to part and service providers.

Shanghai-based consultancy Technomic Asia is clearly going after the trend with its new report "A Strategic Assessment of China’s Light Passenger Vehicle Aftermarket, Fourth Edition."

The company pointed out that:

Parts and service in China's light passenger vehicle market reached an estimated US$27 billion in 2007;

The number of light passenger vehicle cars has expanded to more than 32 million units, with middle-aged vehicles (4-9 years old) reaching a 41 percent share;

The parts and service market is expected to expand at 19 percent per year through 2012.

More information is available at www.technomicasia.com/auto.

Another good source of information on Asian auto markets is the Automotive Resources Asia Ltd., a Bangkok-based division of J.D. Power and Associates with offices in Shanghai and Beijing. I found their "Asian Vehicle Sales" section useful. It's open to the public, but you do need to sign up for free.

China's third-largest domestic automaker, Dongfeng Motor Group Co., managed to beef up sales by 28 percent in the first half of 2008, and more importantly, increased its net profit by 27 percent.

Dongfeng may get even more momentum with hybrid and electric models in the works. The company told the South China Morning Post that it's investing 33 billion yuan on the development project. Part of the fund will be provided by Dongfeng's joint-venture partners Honda, Nissan and Peugeot.

While Dongfeng still doesn't have a clear timeline, privately-owned Chery Automobile Co. Ltd. is already introducing a hybrid model to the market this month. Another domestic automaker, ChangAn Auto Co. Ltd., also is commercializing a hybrid sedan, according to China Quality News. BYD Auto Co. Ltd. is leveraging its lead in the battery business and preparing to commercialize two electric models in the second half of 2009. Geely Automobile Holdings Ltd. is scheduling a 2010 debut for an electric model.

High-mileage and low-emission models are definitely what China needs. Gas prices are still being subsidized, but that won't last forever. Commuters stuck on jammed highways every day will appreciate a hybrid or electric ride.

Note that Chery's hybrid model is selling for 100,000 yuan (about $14,629).

Western and Japanese automakers are not taking active positions in the ongoing hybrid/electric car race in China. Although many of them have hybrid models already, they are not localizing them for the Chinese market. Maybe they are too busy dealing with the North American market. But if they lose out in this round, they'll be offering a golden opportunity for Chinese domestic automakers -- still struggling with exporting to such developed markets as the U.S. -- to claim bigger share in their home market.

Certainly China's auto slowdown is not anywhere near as drastic as the U.S. market's nosedive.

Measured by year-to-date sales, the market still grew 16.7 percent in the first seven months, according to the China Automotive Industry Association. Commercial vehicles grew 18.8 percent, slightly better than passenger cars at 15.8 percent.

But given that more than 100 companies manufacture finished vehicles in China, plus imported cars, competition is fierce. Therefore, the overall market shift may take a bigger toll on some car makers than others.

Ford's affiliated firm, Mazda Motor Corp.. has cut its sales forecast in the country for the fiscal year ending March 2009 from 110,000 to below 60,000. The Wall Street Journal quoted Mazda as saying that a delay of sales network expansion is one of the reasons.

Toyota's Shanghai joint venture FAW Toyota Motor Co. remains positive about reaching its 420,000-unit sales goal in China in 2008. That's according to Shanghai Securities. With another joint-venture factory in Guangzhou, Toyota expected to sell 700,000 cars in China this year. But the Japanese maker scaled back its global sales target last month.

I'm not just alluding to the across-the-board decline in sales for General Motors (20.3 percent), Ford (26.5 percent), and Chrysler (34.5 percent) in the U.S. in August -- and in fact, count in Honda (down 7.3 percent) and Toyota (9.4 percent).

What also raised a red flag in my head was the Chinese auto market's performance. According to portal site Sina.com, China's National Passenger Vehicle Information Exchange Association pointed out that August is the first month of the year when car sales in China fell compared to a year ago. Year-ago comparisons are the usual measure of success or failure. But industry insiders argue that the Olympics pretty much froze auto sales in Beijing.

The China Automotive Industry Association hasn't announced official data for August sales yet. But it noted that passenger car sales dropped on a month-to-month comparison basis for five consecutive months from March through July. That's a record in Chinese auto history, according to the China Securities News.

The Shanghai auto industry saw its "production value" decline 18 percent in July, and "dragged [down] the overall industry output growth in Shanghai by 2.4 percent," the municipal government commented with disappointment.

Analysts at CBI (Shanghai) Ltd. said auto suppliers are bound to face a domino effect. Resin markets are expected to reflect the changes as well.

By the time you read this blog posting, you probably already have cast your vote for America's next president. But before the results come out, let's look at what Sen. Barack Obama has pledged to do if elected. In a letter to the National Council of Textile Organizations, he vowed to use all diplomatic means to stop China from gaining an unfair trade advantage in global markets by manipulating its currency.

An interesting article from the Los Angeles Times quoted a few Chinese foreign-relations experts, who are not overly concerned with Obama's tough line.

But they may well be stretching their optimism.

Richard Baum, director of China studies at UCLA told the LA Times that: "Unfortunately, the search for villains abroad intensifies as the economy worsens at home. So notwithstanding Obama's relatively benign intentions, the first year of his presidency could see a sharp increase in protectionist pressures."

That's exactly what is going to happen, no matter who wins this election, as far as I am concerned.

The report rightly pointed out that "China has traditionally favored a Republican in the White House. Richard Nixon's surprise overture in the 1970s helped break decades of Chinese isolation. And the GOP's more laissez-faire economic policies have generally meant fewer human rights headaches, from Beijing's perspective, and less focus on lost U.S. manufacturing jobs or China's huge trade surplus."

Democrats, on the other hand, tend to be less keen on selling arms to Taiwan, which China considers part of its territory. But at the same time, former President Clinton has a huge fan base in China with his trade approaches.

That's why I often get asked by my friends in China: "Why are the Democrats currently in power [Nancy Pelosi is usually named] so different than Bill Clinton [in terms of their attitude and policies on China]?" I reply: "It has more to do with the individual than the associated political party."

An obvious trend I notice is also mentioned in the LA Times report: The Chinese are reminding Washington that it needs China, especially now. During my coverage of the Rotoplas show last month, the handful of Chinese exhibitors in attendance bombarded me with frequent mentions of the nearly $1 trillion U.S. government debt held by China. They, and all Chinese people, are proud, I know.

But they should be very concerned at the same time: the U.S. and China are in the same boat, and, as I see it, the U.S. still holds the upper hand in the game.

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.

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).

On the evening of October 13, 2008, 22-year-old Fang Chen (alias) received a text message on her cell phone: "New orders came in. Production starts tomorrow!" She was so excited that night that she hardly slept.

A native of Hunan province, Chen had been working in Guangdong province for four years. She works at a plastics toy factory as a "production team leader," which means her monthly salary is 100 yuan [$15] higher than the average worker's.

Chen had been waiting for work. Due to the lack of business, production was off and on. By early October, the 60-person factory had lost half of its workforce.

On October 14, Chen went to the factory early and worked long hours. She returned to her shared dorm after 10 p.m., feeling exhausted but happy.

Two busy weeks passed, orders were finished, and Chen, again, had no work to do.

She used to make 1,300 yuan [$190] a month when she worked 10 hours a day. After deducting living expenses, she managed to put 300 yuan [$44] into savings every month. Now the work has been few and far between, pay has shrunk. Chen made less than 1,000 yuan [$146] last month, which means she needed to tap into her savings just to cover day-to-day living.

Chen couldn't afford to stick around for long. And she didn't.

On November 3, Chen left the factory. She saw the vicious circle beating up smaller toy makers: less business lead to loss of workers, and a smaller workforce further limited the chance of getting large orders.

Chen went down to Shenzhen and had no luck finding work there, so she finally decided to go home.

At the Guangzhou Railway Station, Chen met up with some friends from the same town. They are all very young, born after 1985. They never went to college and some didn't even finish high school. It's hard to tell if they regret choosing to be migrant workers or not. But Chen's friend shrugged and said: "So what? College graduates can't find jobs either!"

That's true. According to the Chinese Academy of Social Sciences, one million college graduates from 2008 and previous years are still on the market, while six million more will graduate by summer 2009. Lopsided supply-demand has slashed prevailing salaries and pushed more college graduates to attend graduate school or join the army.

After the Chinese New Year, Chen and her friends will give up on Guangdong and travel to Zhejiang province instead. Hopefully they'll find some work there.

[Part of this blog post is based on a Chinese-language story on Hunan Online.]

Chinese toy makers' quality scandals of last summer created a perfect opportunity for U.S.-made toys to reclaim market share. Toy companies that still have production in the U.S. quickly jumped on the bandwagon, pitching their "made-in-USA" label and associated quality assurance.

But unfortunately, the "made-in-USA" label may not be a guarantee for safety, according to Michigan-based Ecology Center, which published a report on its Web site HealthyToys.org.

The nonprofit organization and its partners examined more than 1,500 popular toys, purchased from retail stores in Michigan, with portable X-ray fluorescence (XRF) analyzers that identify the elemental composition of materials on or near the surface of products.

The good news is that 62 percent (954) of the products tested contain low levels of chemicals of concern, and 21 percent (324) of all products contain no chemicals of concern.

The bad news is that U.S-made toys are not immune to health hazard. Among the 17 U.S-made toys in the sample, six had detectable levels of lead -- that's 35 percent. Two items had levels above 600 parts-per-million (ppm) -- the federal recall standard used for lead paint. A Halloween Pumpkin Pin even had 190,943 ppm of lead, one of the highest in the entire study.

Ecology Center said 21 percent of toys from China and 16 percent of those from all other countries had detectable levels of lead in 2008.

Although the Toy Industry Association has called the HealthyToys.org report "misleading at the least," it doesn't seem like anyone can argue about the hard facts.

That's a real shame, because the disappointing news is not only alarming parents at the toy store but also tainting the made-in-USA label. Consumers may dampen their passion for supporting domestically made products, and that's not what this country needs right now.

No, Chinese dolls are not invading. Whew!

The fight in hand has been running here in America, between California-based toy makers Mattel Inc. and MGA Entertainment Inc. A breakthrough was made Wednesday (Dec. 3) by U.S. District Judge Stephen Larson, who barred MGA from manufacturing or selling its popular Bratz dolls.

Earlier this year, a federal jury found that designer Carter Bryant came up with the Bratz doll while working for Mattel under an exclusive agreement and awarded Mattel $10 million for copyright infringement and $90 million for breach of contract.

Mattel's classic Barbie dolls have been losing market share to MGA's edgy Bratz dolls since their launch seven years ago. It's got to be tough for Mattel, as the overall doll market has been shrinking in the same time. The New York-based Toy Industry Association said doll sales in the U.S. dipped 8 percent from October 2007 through September 2008.

The LA Times quoted court papers in saying that MGA has said that losing the Bratz dolls would be "lethal" for the company.

Larson said his order won't go into effect until after he has ruled on both sides' post-trial motions. A hearing on those motions is set for Feb. 11.

MGA said it has so far made $405.4 million on the Bratz line, but Mattel claimed it was as much as $777.9 million. Both companies have spent lofty amounts in legal fees on the case -- nearly $30 million in the first three quarters this year for Mattel, according to Bloomberg.

MGA bought rotational molder Little Tikes in 2006 from Newell Rubbermaid Inc. and put Little Tikes' plant and offices in Hudson, Ohio, on the block in February 2008.

It's not surprising that both Barbie and Bratz dolls are made in China -- most likely in the same factories. Back in 2006, U.S.-based China Labor Watch and the National Labor Committee revealed that Bratz dolls were manufacturered by Chinese workers who were made to work 94 hours a week and denied access to injury and health insurance. In response, MGA CEO Issac Larian said in a statement that MGA used "first-rate factories in the orient" and that "the same factories make products for the world's biggest toy manufacturers, including Mattel and Hasbro."

Fifteen years ago, 20 percent profit was less than the market average for toy exporters in Guangdong. But right now, just staying in business is success. Chonggao Toy Products Factory in Zhongshan city -- which, according to rumor, is cutting headcount and experiencing hard times -- said it will not go down.

The company said its 2008 sales will reach HK$700 million (US$90 million), slightly up from previous years. But undeniably, the balance sheet is still in the red, due to rising costs and the strengthening yuan.

Meantime, Chonggao is confident that its 2009 sales will be no less than HK$500 million (US$65 million). "That would be the worst scenario. If governmental bail out plans across the world lead to economic progress, our revenue will easily reach this year's level."

But the company needs to regain profitability. The way to do it, according to Managing Director Cen Lecheng, is to make a foray into the Chinese domestic market.

A long-time export-exclusive contact manufacturer, Chonggan doesn't have its own brands to sell in the domestic market. Cen said he is doing research and will get ready to contract manufacture toys for Chinese consumers.

Maybe he can start with his existing customers like Mattel? China is an underdeveloped market for Mattel, itself. Perhaps it's time to change that.

[This blog post is based on a news report published in the Nov. 28 Zhongshan Daily.]

Miss Wu, who declined to give her first name, works at a large toy factory in Dongguan, Guangdong province. Compared to the 8,000-plus workers who were let go and underpaid by bankrupt Smart Union Holding Ltd., or the 500 protesters against Kai Da Factory, Wu knows that her situation is not too bad.

Originally from Hubei province, Wu has been working for the 3,000-person toy factory for years. Starting in October -- when most Christmas items were finished and shipped -- she noticed the factory started to reduce production. "My fellow workers and I haven't had anything to do at work for months," she said.

The factory owner finally decided that he couldn't afford idle workers and offered Wu a "paid vacation." That sounds like a luxury for a factory girl like Wu. She is used to working overtime, on the weekend, and during holidays.

But there is one problem: The pay during her leave is less than the minimum wage in Dongguan.

Still, Wu is lucky. Less experienced workers have been "talked into" quitting. As the factory is running on low capacity, workers don't get to work overtime -- an important part of their income. Their base salary is very modest, compared to living expenses in Dongguan. So many migrant workers choose to go back home and lay low for a while.

"I'm not included in the government's unemployment stats," Wu said.

Also missing from the government stats are workers laid off from small workshops that are not registered. In Guangdong province, there are many such workshops, where owners can give workers the pink slip anytime and workers just quietly leave.

But, to business owners' advantage, the once-threatening shortage of skilled workers in Guangdong has been solved. Wage increases are slowing down or disappearing.

As a matter of fact, the government announced in mid-November it decided to postpone enforcement of the minimum wage increase prompted by China's updated labor contract law.

Who'd have foreseen this a year ago?

[This blog post is based on information from the New Express Daily and the China Business Journal]

Businessman Ou Bochang has gone through a typical -- also lucky -- career path in the toy industry. He dropped out of high school in the early 1980s, left his hometown in Hunan province, and moved down to Guangdong province to work in factories. Ou gradually worked his way up to become a manager in a large toy company, and finally started his own shop -- Hong Fa Plastics Products Factory in Dongguan, Guangdong, a second-tier toy supplier.

His business was good until last year. "Since the second half of 2007, payment cycles started to stretch: from 15-30 days to 60 days or even longer," Ou said. He sensed the looming storm and adjusted his strategies. He declined orders from large factories -- Ou believe large factories carry the highest risk, took no more than three orders at a time, and limited the value of each order to no more than 80,000 yuan [$11,619].

His conservative approach has saved him from being dragged down in the current wave of toy factory closures. But still, Ou had to tighten his belt. He cancelled the night shifts, cut his workforce from more than 200 in 2007 to about 80, and is running only four of the seven injection presses in his shop.

Ou doesn't regret leaving his management position in large toy firm Jian Da Toys and starting his small business. Jian Da used to employ 15,000 but now only 2,000 workers are left, worrying about the future. Ou's future, albeit unclear, is at least in his own hands now.

(This blog post is based on information from a report in the Chinese-language business newspaper CBNWeekly.)

As the Christmas shopping season unfolds, we are hearing toy safety warnings. Although the latest reports are not pointing fingers at China in particular, I'm sure consumers still remember last year's recall scandals surrounding Chinese-made toys. Plus, after all, China makes 90 percent of the toys in the world.

I'm not making any less of the toy safety issues, but there's a bigger crisis going on in the toy industry China. Factories are laying off masses of workers or closing down completely, not because they fail to make high-quality products, but because the businesses have been squeezed out of profitability, viability and hope.

In the past two days, more than 500 workers protested against Kai Da factory in Dongguan, Guangdong province -- a supplier of Pawtucket, Rhode Island-based Hasbro Inc. -- over a severance pay dispute. The demonstration turned violent, with police cars and computers damaged and workers injured.

Unfortunately, such riots are neither new nor rare in China nowadays. They are not exclusive to but they are especially prominent among toy factories, which usually hire thousands of labor workers.

That's why I decided to start a series of reports on Chinese toy makers. Hopefully, through profiles of individuals, discussion of market trends, and analysis of government policies, we can get a better sense of where the world's toy-making industry is headed.

Stay tuned.

How many American and European families are buying new Christmas trees and decorations this year? Not as many as before. That's bad news for Chinese vendors in the world's biggest "small commodity" -- basically all kinds of consumer products -- wholesale market in Yiwu, Zhejiang province.

"The Christmas goods section is festively decorated, but only from time to time, a couple foreign buyers show up in the hall, driving hard bargains. The Christmas songs, played repeatedly, make the empty market even more cheerless," a story from the Qianjiang Evening News describes.

Vendors, most of whom make their own products, are trying everything to move their inventory and survive the winter. Some are subletting part of their booth space, others have let go of some employees. Disappointed with overseas orders, vendors are marketing the goods to domestic customers more aggressively than ever. "I text-messaged everyone I know, offering good prices and free shipping," a young businessman said. "Many restaurants, hotels and airports [in China] are buying."

The export situation in Yiwu really isn't as bad as it could have been. Thanks to the massive closure of factories in Guangdong province, more buyers are looking into Zhejiang province, where factories produce even cheaper products than those in Guangdong.

"They prefer cheap plastic Christmas trees now, no bells and whistles," a vendor said.

Low price is all that matters. Price-cutting pressure squeezed Hong Kong-listed Boto Co., formerly the world's largest maker of artificial Christmas trees, out of business in late 2007. Boto's high-tech, innovative trees attracted Wall Street Journal reporters and American private equity, but didn't beat the cost hikes and consumers' tighter pockets.

At a time when China celebrates the earth-braking development it has achieved in the past three decades, Beijing finally is recognizing the enormous contribution of a special group: the millions of Chinese people who left their villages and townships to work in manufacturing, construction and services in the booming urban areas.

There's no question, in my opinion, that China's economic miracle couldn't have happened without these hard-working citizens. The Chinese central government, for the first time in history, awarded 1,000-plus "outstanding peasant workers" -- I personally prefer to call them "migrant workers" out of respect -- at a recent, high-profile ceremony in Beijing's Great Hall of the People.

A quick search of the honorary list from the Department of Labor yielded about a dozen plastics workers, including Mr. Su Bing, a team leader at Kautex Maschinenbau GmbH's operation in Shunde, Guangdong province.

Thank you, migrant workers!

A bigger question is how effectively Wal-Mart manages and audits its suppliers in China. In a nation where authorities fail to police the factories, has Wal-Mart kept its supply network clean?

Not according Bo Lin, again, quoted in an investigative story from the Chinese newspaper 21 Century Economic Report.

Compared to the visible cost hikes, he said, the real burden is the hidden rules. He claimed that he was forced to pay kickbacks to buyers and quality control specialists of up to 15 percent, which can take all profits away.

Wal-Mart China insisted that it prohibits kickbacks. But Bo Lin explained: Wal-Mart can't control its partners, including brokers and third-party agencies.

In my humble opinion, in order for Wal-Mart to implement the sustainability strategy successfully in China, it must streamline its supply system and minimize the tiers/layers of suppliers. But the reason suppliers choose to contract Wal-Mart orders out is oftentimes the low profitability of the business. If the prices Wal-Mart offers can only be achieved by factories breaking environmental, labor and taxation laws, is there any room for sustainability to grow?

So when cost control stifles sustainability, which one will Wal-Mart choose? Or will it be able to find something in between?

I couldn't make much sense of how Wal-Mart defines sustainability other than the "20 percent energy increase" and compliance with local environmental and business laws.

"A company that cheats on age of labor, dumps chemicals in rivers, or does not pay taxes will ultimately cheat on the quality of products ... that's the same as cheating on customers and we will not tolerate that at Wal-Mart," as Andrew Winston quoted Lee Scott.

If these statements can be enforced, China and its people will be the biggest beneficiary. But the most fundamental question is how factories can get the money for an operational overhaul, if Wal-Mart's focus remains on the price.

As Winston wrote:

Wal-Mart has to change the internal culture - as one of the suppliers told me, "They sound serious, but with buyers it's still price, price, price." Lee Scott did address the associates directly during his talk and reinforced the message, but until buyers are paid or promoted differently, it's just talk.

Ask Chinese toy maker Bo Lin, who was featured in an investigative story from the Chinese newspaper 21 Century Economic Report.

"Back then, we took such pride in being a Wal-Mart supplier," he said. But being a bottom tier supplier, he struggled for years. "From 2005 through the end of 2007, [the] U.S. dollar depreciated 17 percent, raw material prices soared 80-200 percent, but Wal-Mart didn't pay me a penny more." Bo Lin wisely cut Wal-Mart orders from 30 percent of his business to 3 percent. "Otherwise, I'd have gone out of business for sure, like my friends who relied too much on Wal-Mart orders."

[Till tomorrow.]

It appears that Wal-Mart is giving its Chinese suppliers no option: They must not only deliver the lowest prices on earth, but also make sure these cheap products (American consumers certainly see Wal-Mart items as cheap, but many have no idea how small a fraction of the price tag Wal-Mart pays its suppliers) are Green.

The news came from the latest Wal-Mart Sustainability Summit in Beijing, as reported by Andrew Winston (who just spoke at the Plastics News Sustain ’08 Conference in Chicago) in the Leading Green blog of Harvard Business Online.

Specifically, Wal-Mart mandates that:

All suppliers will sign new agreements indicating compliance with environmental laws, starting with Chinese suppliers to the U.S., U.K., and Canada in just 3 months. Over the next 3 years, all suppliers globally will sign.

The top 200 suppliers will achieve 20% energy efficiency improvement, and most importantly, "By 2012, all suppliers that we buy from directly should source 95% of product from companies that have the highest ratings in audits."

Wal-Mart also asks suppliers for higher-quality products. "Zero defective merchandise returns by 2012" is the goal.

Don't get me wrong, I'm all for green and high quality. But someone's got to foot the bill. If that additional cost for sustainability and high quality is expected to be covered by Chinese factories that already struggle on razor-thin profits, good luck with that. Let's see if Wal-Mart can defy the "you get what you pay for" of common sense.

[Please bear with me. I'll continue to post tomorrow.]

A Nov. 4 story from the Washington Post threw a heavyweight headline at readers: As China's Losses Mount, Confidence Turns to Fear: Officials Use Bailouts to Forestall Unrest. It struck me that writer Ariana Eunjung Cha and/or her editors appear to use "bailout" in an ambiguous way that misleads readers into believing the Chinese government's intervention is more or less the same as the bailouts we've seen in the United States of America.

I urge you to read through this lengthy story through the hotlink, because the facts in the very story illustrate how China's "bailout," if you will, is totally different than the American version. And, perhaps, set aside the sensational political bluff just for a second.

To make a long story short, what really is happening in China right now, is that tens of thousands of factories are closing down. Most of them were operated in the typical Chinese model of "foreign investment + cheap migrant workers = low value-added manufactured goods for export." Now the factories are down -- their owners oftentimes having actually fled -- and the migrant workers are demanding their over-due pay, which the owner had intentionally slipped up paying them for months. So the local governments, in fear of riots in their jurisdiction, have stepped in to pay off the workers, a lot of whom count on that money to return to their home villages.

So the differences between China's and the U.S.'s situation are that, first, the intervention so far has been limited to local and provincial governments, as opposed to the federal level injection of money in the U.S.; second, the rescue fund has filled the pockets of Chinese workers, instead of jumping into the black hole of unsustainable export businesses; and, last but not the least, the money is not touched by management and has no chance to be spent on a pricy, executive spa vacation in California.

Economists are debating whether China will be able to lead the world economy out of the downturn. For individual companies that have already invested in China, the question is whether to stick around or go somewhere cheaper. Two Shanghai-based American consultants just gave Vietnam a close look.

Surprisingly, Vietnam is not as cheap as we think. Francis Bassolino, Shanghai-based partner of Alaris Consulting pointed out in an article that the productivity gap between Chinese and Vietnamese workers is so large that Vietnam's unit labor costs do not fall far below China's, despite the significant wage differential. In other words, don't just look at how much you pay; focus on how much you get for what you pay.

Steve Ganster -- senior vice president, Asia, for Tompkins Associates -- found similar trends. According to a media report, Ganster analyzed the costs of sourcing in China and Vietnam and concluded that with the exception of value-added tax savings, there is no appreciable benefit to switch from China to Vietnam.

Meantime, Vietnam's infrastructure is incomparable to China's. Bassolino made a very convincing comparison: Shanghai alone supports more than five times the shipping volume of all of Vietnam's seaports combined.

Of course, Vietnam also lacks the tremendous domestic market potential China offers, a bigger prize that intrigues all foreign companies.

"At least another decade will pass before Southeast Asia can become a viable, large-scale alternative to China," Bassolino stated. Ganster echoed, saying "China is unparalleled in its economic scale and size for both exports and domestic demand. None of the countries we've looked at will be able to match China's will and ability to continue to make offshoring an attractive sourcing option."

I don't want to promote a China-exclusive business attitude. Good margin justifies investment in any corner of the world. But it seems that China remains a top choice for foreign investors.

Most importantly, I'd like to highlight a point both Bassolino and Ganster mentioned. There's plenty of room to improve margin in China. Bassolino put it this way: "Profit-optimizing strategies have not run dry -- far from it ... the majority of foreign manufacturers neglect to fully apply international best practices such as integrated planning systems, inventory optimization processes and lean techniques."

The flaws and drawbacks of China's legal and business systems didn't stop Chinese factories from plugging into the global manufacturing network, but they are hurdles keeping Chinese companies from expanding globally.

That's the most important point from the following videotaped conference speech [in English] by Long Yongtu, the former chief trade negotiator who brokered China's accession to the World Trade Organization in 2001.
If you have trouble getting the audio, it may be because you are using the FireFox browser. Please switch to Internet Explorer. The McKinsey Quarterly provided the embedded video.

Long wasn't reluctant at all to point out that China lacks a stable, transparent, predictable legal system. On the unlevel playing field, foreign-invested companies and state-owned companies have long enjoyed better treatment than China's small and midsize local companies, which have difficulties getting land, tax breaks, etc.

It's also my personal observation that many Chinese companies thrive by taking advantage of the people-based -- versus rule-based -- system. Good for them. But these domestically successful companies are so used to the Chinese system that they are not prepared when investing abroad. Part of the blame goes to the deep roots of Chinese culture. Neither rule by law nor transparency is a tradition in China.

On the other hand, Long's stance on the openness of Chinese's economy is firm. He said business transactions shouldn't be politicized. He mentioned as an example Coca-Cola's attempt to acquire Chinese juice maker Huiyuan, which is still going through anti-monoply hearings in Beijing. Well, he forgot that quite a few Chinese conglomerates have failed to acquire overseas companies because of political resistance from the host countries.

Beijing announced last week that by the end of 2008, nearly 170 million automobiles had been registered in China. And in 2008 Chinese consumers bought 2.26 million imported cars, alone -- a 13 percent jump from 2007.

But the slowdown in the global auto market is biting Chinese auto makers and suppliers. "Capacity utilization is easily down to 10-20 percent in many auto part factories," according to Chen Wenkai, president of B2B publisher and trade show organizer Gasgoo.

On the toy front, at this week's Hong Kong Toy Fair -- the world' second largest toy show, a trade group official said that the number of toy makers in China dropped from 8,300 to 3,200 as a result of the global downturn, and 80-90 percent of the closed companies involved Hong Kong investment.

Dongguan city in Southern China -- one of the world's largest toy manufacturing bases -- said exports dropped 12 percent in November 2008 on a year-to-year basis. Guangdong province as a whole saw its toy exports for November tank 36 percent from the month prior, or 5 percent over a year ago.

(Sources: China's Ministry of Public Security, Ministry of Commerce, China Securities News, the Consumer Daily)

If you haven't visited Plastics News' multimedia section, now is the time! Here are a few China-related clips that might be of interest to you:

1. Lenovo designers collaborate across the world
Get a flavor of how Beijing-based Lenovo Group Ltd., one of the world's largest computer manufacturers, overcomes cultural, language and time-zone challenges between its three design centers in China, Japan and the United States. You'll understand why the word "common" can cause tension between Chinese and American designers.

2. 'Fit is critical' in headwear

Mr. Roger Ball is a China expert, and his specialty? In addition to being an assistant professor at the Hong Kong Polytechnic University's School of Design, he is the founder of online database SizeChina.com, which is based on measurements and scans of 2,000 Chinese craniums.

3. Turning trash into treasure
Believe it or not, the growth of metal recycling is helping sustainable plastics. Mike Biddle, founder of MBA Polymers Inc., talks about the process of recovering plastics -- not from bottles and films, but from more complex durable goods such as computers, electronics, appliances and cars. MBA Polymers has a factory in Guangzhou.

An early-morning blaze on Christmas Day leveled a three-story building at a Taiwan-invested Jinshun Plastics Products Factory in Shenzhen, Guangdong province, and killed three workers.

The workers' bodies were discovered 18 hours after the fire was put out, according to Nanfang Daily.

Police said the factory owner has been put "under control," as the company had been ordered by local authorities to eliminate fire hazard before resuming production. On September 26, a six-hour fire destroyed part of Jinshun's warehouse. Fortunately, no one was injured in that blaze.

The December 25 case is under investigation; foul play is not suspected.

Survivors said that the three victims -- 36-year old He Guangsheng, 26-year-old Qiu Duojian, and 30-year-old Wang Zhongfa -- were on the third floor of the building when the fire broke out.

In a December 16 webcast, General Electric Co.'s Chairman and Chief Exective Officer J.R. Immelt said, along with a cautionary outlook for 2009, that the company had dropped plans to sell its unit that includes lighting and appliances divisions.

Why? The answer is quite straightforward: No buyers.

"It's just a tough market to execute on this transaction," a Dow Jones news report quoted Immelt as saying.

When GE put the century-old appliances business on the block in May, the company hoped to focus on higher-growth businesses. The Fairfield, Connecticut-based conglomerate entered the business in 1907 and boasts of milestones such as introducing the refrigerator, room air-conditioner and toaster oven.

Industry insiders estimated the value of the business between $4 billion and $8 billion from a sale of the business, which lured interest from South Korea's LG Group, China's Haier Electronics Group Co. Ltd., Mexico's Controladora Mabe and Turkey's Arcelik.

In August, it was reported that Blackstone Group LP would join Haier Group Corp. to bid for GE's appliances unit. However, after Haier hired the consulting firm McKinsey to evaluate the deal, the company decided to shelve the plan.

Times certainly are tough for durable goods like appliances. Thanks to the housing slump and credit crisis, both demand and purchasing power have drastically declined.

So, GE will hang onto the unit "indefinitely," and Immelt estimated its earnings will be $300 million to $400 million in 2009. He told the press that, on the bright side, "We didn't lose any market share as we went through this process." GE is still the second largest appliance maker in North America.

Congratulations on becoming the 44th president of the United States, which is already changing this nation's history. But there is a lot more you can do to impact the direction America is headed, one of the most significant tasks being rescuing the ailing economy.

As I compare the economic policies and plans laid out by Beijing and Washington, it appears to me that China is sticking to concrete and tangible value-creation. Its US$586 billion stimulus package is aimed to boost infrastructure, industrial innovation, transportation, post-disaster construction, as well as environmental protection. In addition, the Chinese government, on all levels, is doing everything it can to preserve and support businesses -- big and small; state-owned, public and private. Such measures include higher export subsidies, lower business taxes, streamlined regulative procedures, more accessible loans, etc. Moreover, Beijing has also made very specific plans to promote manufacturing industries such as automotive, petrochemical and industrial equipment.

Here in America, like every other tax payer, I'm seeing cash being injected - over and over again - into financial institutions, which still keep their coffers locked and refuse to lend money to troubled mortgage holders and business owners. Yes, the Big Three in Detroit eventually received U.S. Treasury loans, but what about the rest of the manufacturing sector? What has been offered to support plastics molders and suppliers across the country? While we bemoan the accelerating loss of jobs, we still hear that businesses may even need to pay more taxes in order to keep the government and the financial industry running. Then, how are they expected to compete with overseas counterparts and keep jobs in the U.S.?

Dear President Obama, I'm a loyal observer of and advocate for global manufacturing. I look forward to more details about your plans to create jobs and turn around the U.S. economy - and, of course, real actions.

The end is where we start from, isn't it? Sometimes, we are just too used to the current life, we need someone else to put an end to it before motivation arises for a new -- and better -- life.

A layoff can do just that. Millions of jobless Chinese migrant workers are bidding farewell to the coastal industrial bases and returning home to their villages, their lives about to unfold new chapters.

Take a look at Longnan county in Jiangxi province. During the past two decades, laborers left their rice paddies and went to work at modern factories in nearby Guangdong province. But as businesses transfer from Guangdong to less expensive inland regions, Longnan has seen a boost of local manufacturing and therefore a demand for more workers.

"Around mid-2008, the county was short 13,000 workers," local employment authorities told Guangzhou Daily. "So we've been trying to recruit people back to Longnan. We still have 5,000 jobs to fill and will organize a job fair right after the Chinese New Year. Hopefully many returnees can stay here."

Certainly, factories in Longnan don't pay as much as those in Guangdong. But not having to be away from home definitely makes up for the discrepancy in wages, emotionally and financially -- living at home slams living expenses.

For Xiao Liangbo and his wife Rong Suqing, post-migrant-worker life is pretty good. After working for a plastics factory in Panyu, Guangdong province, for 15 years, Xiao decided to go back home and open his own factory. In 2004, he partnered with a few other returnees and started producing plastic hangers and clips. Their factory now employs more than 80 and the products are exclusively exported to Japan and America. "Not bad at all! Our orders have piled up to April already," Rong said.

The Year of the Ox is right around the corner, starting Monday, January 26. The first week of the lunar New Year is a public holiday in China, and some employers are even more generous and let workers stay home till after the 15th day.

To be away from home and family during the holiday -- also called the Spring Festival -- can be tough for Chinese people, as it's a time for family. So let me take this opportunity to send my holiday greetings to all our readers and friends, and especially those of Chinese/Asian descent.

A sense of optimism is spreading among local Chinese and even Western expatriates in China, hoping that the Year of the Ox will end the turmoil of 2008's naughty Year of the Rat and bring strength, prosperity -- and a bull market!

Check out this popular video clip featuring a gold ox from tudou.com, the Chinese equivalent of YouTube. [Please use Internet Explorer instead of FireFox.]

A 21 percent profit increase in the hectic year of 2008 probably looks like a dream out of reach for companies like Whirlpool Corp., Electrolux AB, General Electric Co.'s appliance division and LG Electronics, as the home appliances market in North America continues the two-year-long downward trend.

The latest data from the Association of Home Appliance Manufacturers in Washington shows that total shipments of all major appliances in the first 11 months of 2008 were down 8.7 percent, to 62.8 million units.

For China's largest appliance maker Haier, however, the 21 percent increase in profit is a dream coming true. While the company has made a solid effort to crack overseas markets -- including investment in production facilities in America, the Chinese home market -- the Chinese rural market, to be exact -- is sailing Haier through the global economic storm.

The real boost comes from Beijing's subsidy for rural consumers to purchase home appliances. China's central government generously offers to 180 million rural households a 13 percent rebate on purchases of televisions, refrigerators, washers, mobile phones, air conditioners, water heaters, computers, motorcycles, etc.

In the first phase of the rebate program (from December 2007 through October 2008), Haier sold 1.2 million units of home appliances/electronics (there is no product-specific breakdown data available), accounting for 42 percent of the products sold through the program. The second phase started on December 1, 2008.

With its huge success in selling to rural residents, Haier announced earlier this month that it had overtaken Whirlpool and LG Electronics as the world leader in refrigerator sales.

Despite the major slowdown of China's gross domestic product growth rate, which dropped to 6.8 percent in the fourth quarter of 2008, foreign investors continues to expand in the world's third largest economy, including German conglomerates Evonik Degussa GmbH and Siemens AG.

Chemicals giant Evonik Degussa was reported by Chinese state media to have reached an agreement with officials of Hangzhou, capital city of the Zhejiang province, on issues regarding investment policies, investment scale, environmental protection requirements, etc.

During a business visit to Hangzhou in January, Evonik Degussa (China) Investment Co. Ltd. Vice President Tuo Jianliang told the press that he was very optimistic about the industrial policies in Hangzhou and planned to invest 24 million euros. The investment will aim to supply a number of sectors including construction, automotive, food and agriculture. The company said it will add 100 million euros of investment per year in the next four years.

Evonik Degussa currently has established legal entities in 13 cities on mainland China, including Beijing, Shanghai, Guangzhou, Changchun, Dalian, Liaoyang, Yingkou, Qingdao, Rizhao, Anqiu, Nanping, Nanning and Chongqing.

Siemens AG is in talks with the local government in Foshan, Guangdong province, regarding potential further investment. According to a report from Zhujiang Business, Siemens China's Executive Vice President He Weike told city officials that the company is confident about increasing its investment in Foshan and hopes for strong support from the government. Among other industries, He said Siemens hopes to help upgrade the plastics machinery industry in Foshan, where Siemens currently runs a sales office.

It appears that the Siemens expansion deal is still in a very early stage.

In response to a ban the Indian government slapped on Chinese toys for the next six months, an unnamed Chinese official from the Ministry of Commerce told media that China will actively pursue the issue.

New Delhi said on January 23 that the reason for the ban is a concern for public health, as Chinese toys were found to contain higher levels of lead than Indian-made toys in tests. Ironically, India doesn't actually have any official safety standard for toys, regardless of their origin.

Critics in Asia have pointed out that the ban is a means to protect domestic manufacturers against cheap competition.

Raj Kumar, president of the 13-year-old Toy Association of India (TAI), which represents 600 toy industry members, told the Asia Times that "We don't know the reason for the ban, and our trade association is having various meetings to decide on the issue. ... We cannot say right now whether we are happy or unhappy about the ban on Chinese toy imports."

However, Indian toy makers' stock shares soared after the ban was announced; while Chinese toy exporters reported that their shipments to India that left China before the ban have been declined.

The official from China's Ministry of Commerce stated that Beijing may turn to the Dispute Settlement Body of the World Trade Organization.

Chinese critics warned that as the global recession deepens, protectionism and trade barriers may make a comeback in some countries.

The vice president of Beijing-based China Toys Association noted: "Although India is not a major export destination for Chinese toys, the ban will cause some impact, especially negative impact on the industry's morale."

China's appliances rebate program is not exclusive to domestic brand owners. In fact, there are 122 global manufacturers -- including Whirlpool -- participating in the current phase of the program.

Benton Harbor, Michigan-based Whirlpool has had a roller-coaster journey in China. In the 1990s, it had one failed joint venture after another and lost millions of dollars. Besides strategic and managerial mistakes, the company also had a messy time positioning its products.

Chinese magazine Global Entrepreneur described the back-and-forth swings in a recent report: "Whirlpool initially appeared in the Chinese market as a high-end brand. In 2003, the company still didn't establish a solid foothold. But it decided to target Tier 3 and Tier4 markets [small cities] as well. Whirlpool rolled out three series and 30-plus products, opened hundreds of retail outlets across the country and its sales force neared 3,000. Whirlpool lost its high-end image during this process. In 2007, the company decided to exit low-end markets and adjust brand positioning. It was aimed to 'grab 10-15 percent of the high-end washer market.' However, Whirlpool is now selling washers in the rural-focused rebate program."

The rebate program set price ceilings for products: 2,000 yuan (US$292) for a TV set, 2,500 yuan (US$366) for a refrigerator/freezer, 1,000 yuan (US$146) for a cell phone, and 2,000 yuan (US$292) for a washing machine. Sony claimed that none of its products meets the price criteria and therefore is not participating.

Is Whirlpool giving the rural market another try because of slow sales in urban areas? How will the rebate program affect Whirlpool's 2009 sales in China? Unfortunately, like many U.S. firms, Whirlpool doesn't provide country-specific sales data.

What we do know is that Fitch Ratings recently lowered Whirlpool's ratings to one notch above "junk" status and Standard & Poor's and Moody's Investors Service cut credit ratings on Whirlpool to one notch above speculative status.

"We won't comment on the specific action taken by Fitch, although it's not terribly surprising given the current state of the industry," Whirlpool spokeswoman Jill Saletta said in an email to Reuters.

It is with mixed feelings that I hail Liu Chuanzhi's return as chairman of Lenovo Group Ltd., the world's fourth largest personal-computer maker that just posted its first quarterly loss in almost three years.

Liu Chuanzhi, 65, replaces 45-year-old Yang Yuanqing, who is now chief executive officer of the maker of the ThinkPad laptops. Chief Executive Officer William Amelio -- who, like his fellow American predecessor Steve Ward, was part of Lenovo's ambition to become a truly global company -- resigned.

Although Rory Read, formerly the senior vice president, has been promoted to the new role of chief operating officer and president, the media and analysts still believe the changes mark the return of Lenovo's top management to Chinese control and a renewed focus on the Chinese home market.

In the last quarter, Lenovo's sales fell 22 percent in the Americas and 6.5 percent in the Greater China region, including the mainland, Hong Kong and Taiwan.

Liu founded Lenovo -- then known as Legend -- with a group of engineers back in 1984 in Beijing. The Liu-Yang team formed in 1994, when Liu appointed Yang to take charge of the personal computer business. They were determined to change the fact that foreign brands controlled nearly 80 percent of the Chinese personal computer market. In just four years, sales genius Yang made Lenovo the best-selling personal computer brand in China and has kept the status ever since.

When I interviewed Liu in 2002 at a political event in Beijing, he spoke very little about his company. But he did mention a few times his vision of "going abroad, going global."

That global expansion became reality in 2004, when Lenovo acquired IBM's personal computer business with US$1.75 billion. Under criticism and pressure, Liu tried to justify the move at a press conference: "It's not an option to go risk-free and just stay in China."

But a global company is not necessarily a successful one.

My two cents on Lenovo's case is: It lost focus on both the product front and customer service. It didn't move fast enough to grow the classic ThinkPad brand or establish its own brands in America. The laptops may be cheaper, but they haven't stayed ahead of trends. Lenovo's flawed ordering system also causes delays and frustrates North American customers, including myself. Meantime, it put too much weight and hope on marketing, particularly the sponsorship to the Beijing Olympics.

The economy is bad, competition fierce and customers more sophisticated. The message for Liu is that it's not a time to be slow or sloppy.

This week, Whirlpool posted an operating loss in North America, its largest market, and said that it was in talks with banks regarding renewal of credit lines. Unfortunately, since its debt ratings have been slashed, the company may find itself facing tighter and more expensive credit.

If, just in case, the world's largest appliance maker ends up in deeper financial trouble, what help could it expect from the government? Presumably, Washington might grant it a bridge loan, similar to what the Big Three received, in order to protect jobs and its brands. Such aid to appliance makers wouldn't be the first among developed countries, as Italy is planning aid packages for the auto, auto parts and household appliance sectors.

Italy's intervention to the appliance industry will have a lot in common with China's, as the measures will include incentives for buyers worth about 300 million euros, as well as further tax breaks and financing.

At this point in time, the need for government intervention worldwide is indisputable; it's the intervention's effectiveness that remains the key issue. China's buyer subsidy program is generating strong sales for both Chinese and foreign manufacturers. The government estimates the amount averages US$22 billion annually. Chinese brand owners and retailers that are overwhelmed by demand are contracting business out to suppliers in places like Taiwan, spreading the surplus to other regions.

Here in America, Washington has taken limited measures to aid manufacturing. The format of government aid in general has also been limited to injecting cash instead of more transparent and effective ways of raising industry performance/sales.

Well, yes, we've seen the whirlwind of new green initiatives emanating from the Oval Office, including the president's order for higher energy efficiency standards. The White House said the standards should deliver energy savings of $500 billion for consumers. How wonderful, if only the government can make sure consumers are able and willing to afford new appliances. A $600 washer that can save you $60 a year in utility bills sounds attractive, but it's all pointless if the consumer can't fork out $600 to buy the machine.

Washington should focus its nearly trillion dollar stimulus package more on the buyer/consumer end by tying the incentive to actual sales transaction, which can directly stimulate the seller/manufacturer end.

Last but not the least, the manufacturing industry, including brand owners and parts makers, deserves more benefit from the government aid packages. Like I always say, this nation will not sustain itself by diminishing manufacturing.

China's state broadcaster China Central Television (CCTV) organized illegal firework display that set fire to a new, vacant luxury hotel building the TV network built next to its headquarters. While public anger simmers over CCTV's spending and selective news coverage, some are questioning the quality of the plastic building products used in the tower.

"The fire started around the 30th floor and quickly gutted the entire building. If the builder had used flame-retardant plastic insulation boards, the blaze wouldn't have spread so fast," a B2B Web site commented. Others blame the plastic building products for generating huge amounts of toxic fumes that killed a firefighter and injured a handful of others.

After I posted the news in the Chinese-language version of the PN China Blog, a reader replied: "There's no industry standard or inspection system in place for plastic foam boards in China. Most plastic boards in the market used sub-par, recycled material. They either contain no flame-retardant additives what-so-ever, or use too little or low quality flame-retardant additives. ...The market is still focused on just the price point. We hope the authorities will establish and enforce standards. Don't leave fire hazards in homes and modern high-rises. ... This could become the 'melamine in construction materials.' (the reader was comparing the fire hazard to the melamine found in milk powder and baby formula products in China)"

Actually, China does have a "mandatory national standard for flame-retardant products in public buildings (GB20286)." But either there's no enforcement or people found loopholes. For example, the standard probably doesn't apply when the owner/builder opted for building materials without flame-retardant claims.

Last month, a bar fire caused by fireworks killed 15 and injured 22 in eastern China's Fujian province. Flammable decoration materials (plastic ceiling boards) caught fire and emitted heavy smoke and poisonous fumes, which knocked out the victims before they could escape.

Since the debate is so heated among economists, politicians and business people around the world, I'm not going to dive into propositions like whether this provision of the stimulus package will benefit or hurt the U.S. economy and/or the world economy.

I'm simply here to hear from you, our readers, about how this provision relates to and can possibly impact the plastics industry.

A fair amount of the construction materials to be purchased under the stimulus plan will be plastic products, right? Can anyone give some examples?

What quantity of plastic building products does America import every year? Mostly from which countries and regions? How much of imported plastic building products goes into governmental projects?

And, if we look into the details of the provision, waivers are allowed in cases where American-made products necessary for a project are not readily available. Are there any such plastic products?

Waivers are also allowed where total project cost is 25 percent more expensive than it would be if imports were used. This one looks tricky to me. How big of a price advantage do imported plastic pipes have over U.S.-made ones? Will American manufacturers be willing to lower their prices in order to beat the 25 percent qualifier?

Also, we know that countries like China, Russia, Brazil and India have not signed the World Trade Organization's 1995 agreement on governmental procurement and, therefore, do not enjoy the rights to the U.S. procurement purchases. But what about the 38 countries that have signed the WTO procurement code and have been exempted from the buy-American clause? Is it OK to buy from these countries? Doesn't it defy the whole purpose?

Taiwanese resin maker Chi Mei Corp. has finished the construction and equipment installation of its 100,000-metric-ton ABS production facility in Zhenjiang, Jiangsu province. The project started in August 2007 with a total investment of US$40 million.

According to the Economic and Trade Commission of Jiangsu, Chi Mei was hit hard in the global financial crisis and held off on the launch of the new project. Thanks to China's appliance purchase rebate program, the company has seen strong growth in demand for January. Production has since started.

Chi Mei acquired Grand Pacific Petrochemical Corp.'s 250,000-metric-ton ABS plant in Zhenjiang in early 2008.

As most automakers in China report healthy sales growth amid the global downturn, Paris-based Inergy Automotive Systems is building a plastic fuel system plant in suburban Beijing.

According to a media report from Qianlong, the company is investing a total of 300 million yuan (US$43.9 million) in the plant located in the Beijing Auto parts Industrial Base in Shunyi district, a suburb northeast of Beijing. The first phase of the project will cost 120 million yuan (US$17.5 million), cover a factory complex of 21 mu (150,685 square feet), and is expected to start production by the end of this year, creating more than 100 jobs and generating annual sales of 300 million yuan (US$43.9 million). The company has secured contracts from Hyundai's Beijing operation.

Inergy is a joint venture between Cie. Plastic Omnium of France and Solvay SA of Belgium. Its first manufacturing facility in China went on stream last summer, with reported annual capacity of 400,000 parts.

The overall Chinese real estate market is sluggish, but post-quake reconstruction investment in Sichuan province is boosting the need for plastic building materials as well as household items. In fact, Guangzhou, Sichuan officials will hold a procurement conference at the Plastic Building Materials Pavilion during the 2009 Chinaplas trade show, slated for May 18-21.

The Sichuan chapter of the China Council for the Promotion of International Trade will present detailed procurement information to attendees and companies. The council will also display a show house featuring typical post-quake construction in Sichuan, including building materials and household plastic products.

At a February 18 Chinaplas press conference, Guangdong Liansu Technology Industrial Co. Ltd. said the company is planning to establish a manufacturing base in Sichuan, according to a report from West China City Daily. Foshan, Guangdong-based Liansu makes plastic pipes, profiles, wood-plastic composite building materials as well as plastic machinery such as extruders.

Sichuan has rolled out 898 post-quake reconstruction projects, with investment totaling 18 billion yuan (US$2.6 billion). Authorities have indicated that 80 percent of the projects are due to finish by the end of 2009. Quality control agencies in the province have launched a monthly random inspection of building materials.

China's Guangdong Plastics Exchange (GDPE) announced Monday that it has sealed a cooperation agreement with Shanghai-based SPD Bank that will provide its trading companies with up to 1 billion yuan (US$146 million) in physical commodity-based financing.

In an interview with Guangzhou Daily, GDPE Vice President Liang Hongbing said the move is intended to alleviate cash flow pressure among trading companies. Small and midsize plastics firms in China have been facing a shortage of cash flow since last year, he said. Combing Chinese and foreign markets, there are nearly 10,000 different grades of plastic resins. Under the pressure of soft export demand and limited capital, a good number of plastic resin makers, processors and trading companies are faced with operational difficulties.

GDPE will continue to provide financing for its members. The amount of physical commodity-based financing credit is expected to reach 10 billion yuan (US$1.5 billion) in the next three years and benefit thousands of small and midsize enterprises, Liang said.

Dalian Commodities Exchange, which has been trading linear low density polyethylene futures since July 2007, is preparing to launch PVC future contracts soon.

The exchange has been fine-tuning the contract and conducted a successful 60-minute test drive February 27, according to various media reports. Industry insiders have hinted that trading will begin by the end of this month.

Being the world's largest producer and consumer of PVC resin, China managed to grow its PVC capacity by 9.2 percent in 2008. However, actual output dropped almost a million metric tons from the previous year, to 8.8 million metric tons. Meantime, apparent consumption of PVC exhibited a sharper annual decline of 11.2 percent to 9.2 million metric tons.

As Plastics News has reported, Indian and Chinese officials and businesses exchanged friendly words on bilateral trade and cooperation at the recent PlastIndia event. However, the day after the trade fair, Indian authorities announced the initial findings of their anti-dumping probe into Chinese plastics equipment, including lofty punitive duty rates.

According to the February 10 notification posted by the Indian government, a 223 percent duty rate will be imposed to "plastic processing or injection molding machines" in the range of 40-1,000 metric tons that originate in or are exported from China.

A total of 10 Chinese machinery suppliers tried to rebut the anti-dumping presumption and responded to investigation questionnaires, which focused on cost structures and market-economy examination. These companies have received duty rates from 76 percent to 223 percent. They are:

• Guanzhou Borch Machinery Co. Ltd. (76 percent)


• Ningbo Liguang Machinery Co. Ltd. (95 percent)


• Ningbo Haitian Huayuan Machinery Co. Ltd. (100 percent)


• Ningbo Haitian Plastic Machinery Group (100 percent)


• Ningbo Haixing Plastics Machinery Mfg. Co. Ltd. (123 percent)


• Hangzhou Tederic Machinery Co. Ltd. (126 percent)


• Haitian Heavywork Machinery Co. Ltd. (128 percent)


• Zhejiang Golden Eagle Plastics Machinery Co. Ltd. (147 percent)


• Zhejiang Sound Machinery Manufacture Co. Ltd. (163 percent)


• Smargon Plastic Machinery Co. Ltd. (223 percent)

The case is still open, as the Indian government said it would conduct further verification and hold hearings before announcing final findings. Feedback to the initial findings is due 40 days from the notification. No other timetable has been given.

Five weeks after the Indian government announced its ban on Chinese toy imports, New Delhi has decided to relax the ban as of March 2. India's trade ministry said Chinese toys can be imported, but they need to be certified as safe by recognized international standards, such as the International Organization for Standardization (ISO) or the American Society for Testing and Materials (ASTM).

The ban of Chinese-made toys intended to bar imports for six months for "public health and safety" reasons. Beijing's warning that the move could seriously jeopardize bilateral trade ties seems to have worked, industry insiders said.

China's Minister of Commerce Chen Deming told the press that Beijing dispatched a vice minister of commerce to India to discuss the toy ban.

Meantime, Indian newspapers reported that toy prices in India soared 30-100 percent under the ban as local supply failed to meet market demand.

The trade tension between the two emerging economic powers has escalated in recent months as India raised a series of trade barriers and investigations. It is difficult to predict whether the toy ban's cancellation bodes well for the ongoing anti-dumping case of Chinese injection molding machines.

Shanghai Chlor-Alkali Chemical Co. Ltd. is seeking a buyer for its 10 percent stake in Bayer Polymers (Shanghai) Co Ltd., a polycarbonate manufacturing unit of Bayer AG's wholly owned Bayer (China) Ltd. subsidiary.

Bayer Polymers (Shanghai) was established as a 90-10 joint venture in September 2001 with registered capital of US$188.1 million. The company has been producing polycarbonate, PC/ABS blends, etc. with an annual capacity of 100,000 metric tons since September 2006.

The local manufacturing facility, however, hasn't been profitable. It has taken sizable losses in the past few years: 365.3 million yuan (US$53.4 million) in the red in 2007 and 424.2 million yuan (US$62 million) in 2008. Shanghai Chlor-Alkali cites radical market fluctuation, China's export rebate policy change and rising production cost, among other reasons, for the joint venture's failing business.

Challenged by continuous losses, Bayer Polymers (Shanghai) will be restructured by majority owner Bayer (China), a move that can severely dilute Shanghai Chlor-Alkali's stake in the underperforming joint venture. Therefore, Shanghai Chlor-Alkali hopes to sell its share before changes occur.

Shanghai Chlor-Alkali is a 51.6-percent-owned subsidiary of state-owned Shanghai Huayi Group Corp. The company's board of directors approved the sale in late January, according to an announcement. The Shanghai United Assets and Equity Exchange Web site shows that Bayer Polymers (Shanghai) -- classified as a state-invested enterprise -- is listed from February 26 through March 26.

In an effort to further boost its domestic market, China is expanding its rural purchase incentive programs for appliances and electronics to include automotive vehicles as well. Farmers will receive reimbursements of up to 5,000 yuan (about $730) per vehicle on purchases of light trucks or minivans and up to 650 yuan ($95) per unit for motorcycles, according to the Finance
Ministry.

Beijing continues to subsidize both domestic and foreign brands in its rural purchase incentive programs. General Motors Corp.'s mini vehicle joint venture, SAIC-GM-Wuling, is believed to be one of the biggest beneficiaries of the plan. The joint venture claims it supplies half of the Chinese market for light vehicles.

The "cars to the countryside" plan will cost the government 5 billion yuan ($730 million) and is expected to boost vehicle sales by more than 1 million units this year, which will help to push China's total auto sales above 10 million units for the first time.

Auto supplies such as Lingyun Industrial Corp. also will benefit from the plan, Chinese media said.

I'm writing in response to our managing editor Don Loepp's blog posting "When will the recovery start?" While Ben Bernanke spoke of a possible bottoming out of the U.S. economy by the end of this year, U.S. industrial output in February fell to its lowest level in almost seven years, and industrial capacity utilization hit a record low.

U.S. manufacturing is still deteriorating, but the pace of decline slowed from 2.7 percent in January to 0.7 percent in February, due to an increase in the production of motor vehicles and parts after extended plant shutdowns in January.

Another important sign of hope, in my eyes, is President Obama's decision to finally help small businesses. He announced Monday that $730 million from the stimulus plan will be used to reduce lending fees while increasing government guarantees on a portion of up to 90 percent of Small Business Administration loans. The program also seeks to increase bank liquidity by injecting $15 billion into banks in order to boost lending to small businesses.

There are about 25.8 million businesses in the United States, and more than 99 percent of all employers are small businesses, according to the U.S. Small Business Administration. In the plastics industry, molders and machinery makers with no more than 500 employees are considered small businesses, so are plastics material and resin manufacturers with no more than 750 employees.

China's largest domestic resin compounder Kingfa Sci & Tech Co. Ltd. has recently launched a long-term thermal-aging lab approved by Underwriters Laboratories. The facility is the first UL-approved LTTA lab established by a materials manufacturer in the Greater China region.

In an LTTA test, engineers accelerate the thermal aging process of polymeric materials such as engineering plastics for around 5,000-10,000 hours and project the highest possible service temperature with a 100,000-hour half-life for a specific material, i.e. the relative thermal index (RTI). RTI is an indication of a material's ability to retain a particular property (physical, electrical, etc.) when exposed to elevated temperatures for an extended period of time.

"During the one-year-plus of the certification process, we made tremendous progress in terms of our understanding of the testing standards, lab operations, control of the testing environment, etc.," Kingfa General Manager Xia Shiyong said at the opening ceremony.

Plastics materials' thermal endurance and flame resistance have been put in the spotlight in China, thanks to a series of high-profile blazes, particularly the CCTV tower fire in February. Chinese authorities have since strengthened the enforcement and inspection of a ban on polyurethane and all other plastic materials that emit toxic fumes when burned out of public places.

An economic downturn usually is a time to go back to school. But you don't need to attend an expensive MBA program to gain new knowledge and skills. Plastics News China Blog is introducing its brand new series of Chinese business and culture advice. And it's free!

Since most how-to-do-business-in-China books are written by Westerners with an outsider's perspective, I'm going to take a new approach. I plan to review the existing literature and add my own take from an insider's point of view.

I am going to start with a recently released DVD set "On the frontlines: Doing Business in China," presented by The Atlantic. China veteran James Fallows played the editorial supervisor and co-host, while New York Times business columnist Joe Nocera provided commentary at the end of each program.

I chose this DVD set because it's up-to-date and the video and audio really brings out the cultural nuances vividly, compared to print.

Do you know why Dominos failed in China but Pizza Hut scored huge success? Have you ever wondered exactly how China evolved over the past century and what that says about your Chinese business partner? I can't wait to share the answers with you.

Vicky Parwani, treasurer of the Association of Furniture Manufacturers & Traders (India), shared with me a letter sent by the association to India's Directorate General of Anti-dumping & Allied Duties under the Ministry of Commerce & Industry.

In the letter, the association opposed Indian government's preliminary anti-dumping charges on Chinese injection molding machines. "The association strongly condemns such as move that will destabilize the plastic furniture industry," the letter said.

Parwani is also a partner of Mumbai-based molder Exclusiff Seating Systems.

The sole applicant for India's anti-dumping investigation on Chinese plastics injection molding machinery may have inflated its market-share data in order to qualify for filing the complaint, according to an Indian machinery executive. He pointed out that the Indian government requires the applicant for an anti-dumping probe to have at least 25 percent of domestic market share.

K. Bhattacharya, partner of Kolkata, India-based plastic machinery manufacturer Protech Engineering, told Plastics News that L&T Demag makes 400 machines annually, while stats compiled by Indian plastic resins giant Reliance Industries Ltd. show that more than 3,000 injection presses were sold in India in the 2007-08 fiscal year.

Bhattacharya provided us with machinery sales statistics for 2005-06, 2006-07, and 2007-08 (click year to open in new window). The stats include both locally made machines and imports, and Bhattacharya said his team is working on collecting more specific information about India's indigenous machine building capacity.

"All three leading machine manufacturers -- namely, L&T Demag, Windsor Machinery & Milacron India -- put together make only 1,100 machines," which is barely a third of the total market share. "India's plastic processing industry will get affected badly in case machines from China get blocked this way," Bhattacharya asserts. "Can China afford to lose this big business?" he added.

In an effort to ease the pressure on its export sector, China is again increasing the export tax rebate for a wide range of products, including some plastic resins as well as finished products.

According to an announcement jointly issued by China's Ministry of Finance and State Administration of Taxation, starting April 1, 2009, the export value-added tax rebate will rise to 11 percent or higher for "a selection of plastic materials and processed products."

In fact, the rebate rate will reach 13 percent for some plastic resins, including certain grades of unplasticized PVC, polyolefins, nylon, PET, etc.

A detailed tax chart (in Chinese) is available at http://cws.mofcom.gov.cn/accessory/200903/1238153268800.xls

China's export rebate for processed plastic products was cut from 13 percent to 11 percent in September 2006, and further down to 5 percent in July 2007. Due to the impact of the global recession, Chinese exporters have seen sharp declines in demand from particularly the U.S. and Europe.

Beijing beefed up the tax rebate for certain plastic products to 9 percent on November 1, 2008. However, exports of plastic products still continued to drop at a double-digit pace in January and February.

The China Securities Regulatory Commission on April 2 notified Kingfa Sci & Tech Co. Ltd., the nation's largest plastic compounder, that three current and former company executives are under investigation for questionable stock purchases. Guangzhou-based Kingfa disclosed the news in an announcement.

The three executives include board members Xia Shiyong and Li Jianjun, as well as a former senior manager, Huang Xianbo, who was a deputy director of the corporate technical center.

Kingfa launched its stock options program in 2006. By June 30, 2007, Xia owned 31.58 million shares of Kingfa stock, Li 8.74 million shares, and Huang 3.28 million shares. Huang left the company in September 2007.

Public records show that nearly a dozen of Kingfa executives have been selling stock since December 2008. Li, alone, sold 2.3 million shares in late December.

Chinese media quoted anonymous sources as saying illegal stock selling by executives is not uncommon in China. The usual consequence of such case is the companies seize the earnings from the executives. That Kingfa's executives are being investigated by the CSRC perhaps indicates the severity of the case, a few media reports said.

As the old Chinese saying goes, "food is heaven." Nothing takes higher priority to the Chinese than enjoying good food. That explains why I open this new series with a case study on restaurants. Let's take a peek at the success and missteps of American pizza restaurant chains in China.

"On the frontlines: Doing business in China" gave four reasons for why Pizza Hut succeeded and Domino's failed in that nation:

1. Dine-in versus carryout: Pizza Hut makes itself a fine dining restaurant in China, while Domino's only offers carry-out.
2. Local flavor: Pizza Hut designs flavors specifically for the Chinese, while Domino's uses toppings that are popular in Japan and Taiwan.
3. Traffic: Beijing's traffic jams make Domino's 30-minute delivery promise impossible to achieve.
4. Size: Pizza Hut trims down the pizza size for the Chinese, while Domino's sticks to the American portion.

Actually, carryout can be a viable business model in China, but combining Domino's expensive (by Chinese standards) pricing with carry-out -- which usually is associated with $3 Chinese lunch boxes -- is unwise. The emerging Chinese middle class has deep pockets, but they are also quite demanding and particular on the value/price ratio. The carryout model doesn't come with much value.

Don't forget about the Chinese urban lifestyle. Eating out is essential for business, social and everyday life. For that need, Pizza Hut provides quality and exotic experience that customers get excited about. Their menu is as fabulous as their decoration: Lamb balls with cumin, cheese-stuffed wings, calamari, sausage and oyster mushroom kebab, herbal shrimps, escargots, waffle crispers, onion rings, cherry tomato and bacon roll, barbecue ribs, New Orleans wings, and much more. Not exactly what the Pizza Hut down the street in Akron offers.

Ten years ago in Beijing, I stood in the line outside a Pizza Hut for half an hour on a freezing winter night. My friends and I thought the wait was worthwhile when we finished the meal. Not because the pizza was much better than Domino's (let's face it, pizza is at best an acquired taste for the Chinese). It was worthwhile because we got in the hot spot of the town, because we had plenty of self-serve fruit salad, because we tried clam chowder soup for the first time in our lives, and because we really enjoyed the nice eating atmosphere.

Food is heaven in China. But it's the whole eating experience that delivers value. The same holds true for any other product or service you try to sell in China. The key is to create a unique and meaningful user experience.

Despite the global economic downturn, the world's top profile maker, Dalian Shide Plastic Industry Co. Ltd., continues to expand. The Dalian, Liaoning-based company has signed an investment agreement to build a large-scale profile manufacturing facility in Anyi County, Jiangxi province.

Total investment for the new, three-phase project is 1.2 billion yuan ($176 million). Phase one aims to build profile extrusion lines with annual capacity at 80,000 metric tons (176 million pounds), which will be doubled during phase two. The firm will add plastic board and sheet extrusion lines during the last phase.

The Anyi government said its preferential policies encourage investment from outside of the province. Beijing-based China Plastics Processing Industry Association has recognized Anyi as an "exemplary production base of plastic-alloy profile." So far this year, 18 construction product manufacturers have decided to open factories in Anyi.

Following a Jan. 23 report forecasting a 30-70 percent yearly profit decline, Chinese compounder Kingfa Sci & Tech Co. Ltd. confirmed in its April 7 annual report that its 2008 net profit dipped 42.7 percent. Operating profit contracted further, marking a 67.4 percent decline from the previous fiscal year.

Kingfa listed a number of contributing factors to its thinning margins:

• During the first three quarters of 2008, plastics processors encountered difficulties in maintaining profitability and healthy cash flow, thanks to Beijing's macroeconomic and currency polices. Consequently, Kingfa's ability to raise prices and collect payments was impaired.

• Due to major resin price hikes in the first half of 2008 and sharp falls in the fourth quarter, the company suffered inventory depreciation loss as well as market reluctance to buy. Kingfa's overall product gross margin was 13.6 percent, just a half percentage point lower than the previous year.

• Kingfa's majority-owned real estate business unit took a 126.5 million yuan ($18.5 million) depreciation loss, as the Chinese housing market cools down.

• Wholly-owned subsidiary Mianyang Changxin New Material Development Co. Ltd. and its subsidiary were affected by the Sichuan earthquake. In addition to damage to factory buildings and machines, the companies' customers in the earthquake region either delayed payment or suspended materials purchasing.

• The snow storms in southern China during the beginning of the year led to transportation cost hikes. High oil prices and new customers located far away from shipping points also increased sales expenditures.

• Interest payments increased due to growing bank loans and rising interest rates in the first three quarters.

• Changes in accounting and tax policies.

Despite the profit decline, Kingfa's annual report stressed its goal of securing more than 10 percent of the domestic market by 2010.

Thanks to strong demand from the appliances and automotive end markets, Kingfa's capacity utilization rate exceeded 80 percent in March, according to analysts at Guotai Junan Securities Co. Ltd.

However, it is hard to tell if the growth in 2009's first quarter represented a real recovery or temporary uptick caused by inventory replenishment. "April and May will be critical times to show the real demand from downstream," a Guotai Junan's report said.

Medical equipment and supplies manufacturer Henan Piaoan Group Co. Ltd. has sealed an agreement to purchase patented polylactic acid production technology, engineering and equipment from Japan's Hitachi Plant Technologies Ltd.

The project in Changyuan, Henan province, is expected to go on stream in March 2011, with an initial annual capacity of 10,000 metric tons (22 million pounds), according to a press release issued by Hitachi. Piaoan plans to expand the capacity to 150,000 metric tons (331 million pounds) "in the future," with a total investment of 1.83 billion yuan (US$267 million).

Piaoan plans to make medical supplies out of PLA biopolymer and become the first "high-quality, industrialized PLA production base in China," the release said.

Hitachi Plant Technologies developed PLA manufacturing technology in 2004. The company claims its patented technology produces pure, colorless and easy-to-process PLA materials.

Privately-owned Piaoan reported 1.2 billion yuan (US$176 million) in 2007 annual sales. The company didn't comment on the new project. Its corporate Web site, however, said the company invested 300 million yuan (US$44 million) to build 10,000 metric tons of PLA capacity with equipment imported from Switzerland.

The fact that "yes" and "no" in China can mean the opposite of what people expect scares foreign businesspeople, who oftentimes turn to cultural consultants for help. But reading between the lines is not a Chinese invention. The Chinese just take it to a higher level and on a broader scale.

Let's say two people meet on their first date. At the end of the meal, the gentleman politely asks when he can see the lady again. What he really wants to find out is whether she wants to see him again. If she suggests a time, the gentleman secures a second date. If the answer is "I'll call you," then she is either uninterested in or unsure about it. She just doesn't want to throw in his face: "I don't want to see you again." Doesn't this hold true in most places in the world?

Well, I just revealed the secret weapon for you to interpret "yes" and 'no" in different cultures: Make your own judgment by seeking specific, action-oriented details for the next step. If a Chinese partner expresses interest in your business proposal, then try and see if he or she is willing to set up a follow-up factory visit. "I'll think about it" or "I'll get back to you" or any other vague reply that doesn't commit to a next-step action is not a positive answer.

In the Chinese culture, people prefer not to use "no" directly, in order to save the other party's face. This almost applies to all occasions (with exceptions such as in a court of law, of course). But it's more than that. Due to the absence of a credit system and the lack of regulatory enforcement, Chinese business people take their time to establish trust on a personal level for a business relationship. The American way of making quick business decisions often hits a brick wall.

As a couple of interviewees in the first program of "On the frontlines: Doing business in China" pointed out, the Chinese give the name "seagull" to overseas business people who just want to "come, shoot and leave." You need a little more patience to allow for due diligence -- in the form of after-hours entertaining or otherwise -- for both sides.

Again, the abovementioned issues are neither complex nor unique to China. In a global market, it makes things easier to keep your eyes and heart open and look for commonalities, instead of dwelling on differences.

Plastics News Global Group for the fifth straight year will be exhibiting (booth 10.2J11) at Chinaplas, the largest plastics trade fair in Asia. The 2009 show, also known as the 23rd international Exhibition on Plastics and Rubber Industries, will take place May 18-21 in Guangzhou.

A team of PN U.S. and China staffers will be at the show, including publisher Tony Eagan, marketing and trade shows director Linda Whelan, general manager of online products Ron Shinn, associate publisher and editor Robert Grace, assistant managing editor Nina Ying Sun, Guangzhou-based Asia Bureau Chief Steve Toloken and Shanghai-based correspondent Lauren Hilgers.

Mark our booth number 10.2J11 in your planner and drop by at your convenience!

The China Securities Regulatory Commission has approved the Dalian Commodities Exchange to begin trading PVC futures. In the April 15 announcement, the agency said it will soon approve DCE's PVC futures contract.

Being the world's largest producer and consumer of PVC resin, China is in urgent need of futures trading to balance the dramatic pricing fluctuations and reduce market risk, CSRC said. The agency said it values DCE's experience of trading linear low density polyethylene futures since July 2007.

DCE said it has established a trading, transaction, and delivery system, and selected recommended delivery manufacturers and grades. The exchange published for public review the PVC futures draft contract, which specifies trading content as class-1 and premium PVC resin of the SG5 grade.

The Chinese standards categorize PVC resin into 10 grades, from SG0 to SG9. Among them, SG5, which is PVC powder produced through suspension polymerization, makes up more than 70 percent of the PVC consumption in China.

Thanks to globalization, one nation's fiscal spending to stimulate economic growth is bound to "leak out" to the entire global supply chain. For example, China's move to subsidize big-ticket item purchases - such as appliances, cars and electronics - in rural areas is bolstering sales for Japanese and Taiwanese suppliers, among others.

Chinese financial media CBN cited a report from Nihon Keizai Shimbun saying that Japanese material suppliers, including Mitsubishi Chemical Corp., have raised their ethylene capacity utilization rates to 75-90 percent. The report attributed the change to China's growing demand as well as the ending of the industry's inventory adjustment.

Taiwan Union Plastic Machinery Co. Ltd. also reported 10-15 percent sales growth in the first quarter, when the company said it sold more than a dozen large injection molding machines (with clamping forces of more than 1,600 metric tons). The company's 2008 sales contracted 5-10 percent, according to a news story from Xinhua News Agency. "We didn't expect to see the effects [of the stimulus package] so soon," a company official said, "We believe the growth rate will reach 20 percent for 2009 fiscal year."

Recent media reports from China revealed disturbing news on the making of fake eggs with synthetic resin and pigments. A number of investigative reporters across regions visited "fake egg masters" who hand make and assemble egg yolk, egg white and eye shells. These fake eggs are being sold as regular, edible eggs. Consumers usually don't find out until they notice the unusual texture of the eggs during cooking or eating.

Photos and videos of the process are posted online, such as here. So far, there is no official conclusion on the effects of these fake eggs on human body. But media reports have quoted experts advising consumers not to eat them.

There is a lot that can be said about this, from business ethics to consumer rights.

We all know that China needs better enforcement of intellectual property laws, but in this case, who owns the intellectual property of eggs? Mother Nature? Ironically, the egg counterfeiters actually claim their "independently invented production techniques." One counterfeiter said he spent years developing "innovative" methods that make fake eggs "flawless".

Coincidentally, earlier this month, the owner of an injection molder in Wuhan said it took him hundreds of thousands of yuan and two years' of "research and development " to come up with "quality knockoff car parts." The operation was busted by authorities, according to the government Web site.

What the two cases have in common is that the ultimate goal is cost reduction, which seems to be what some Chinese businesses embark on. You'd wonder why they are willing to invest the capital, time and talent on knockoff projects? Why wouldn't they do normal, legit business?

Among all reasons, I think an important factor is the severe deficiency of business knowledge and skills that are required in original product development, launch, marketing and brand management. It's easy to imitate, no matter how hard the imitation process is. It takes much more to develop marketable and profitable new products from scratch. Many Chinese businesses understand their weaknesses and simply decide to take a short cut by making knockoffs. Meantime, the government is not doing a job of banning these illegal and unethical shortcuts.

These shortcuts don't lead to real, sustainable success. They bring short-term financial gains for some individuals, but also cause long-term damage to the society.

It feels like a long time ago, probably because subconsciously I just don't want to revisit what happened in the spring and summer of 2003 in Beijing. But the ongoing swine flu (or "influenza A (H1N1)") scare revived my memory of the outbreak of the severe acute respiratory syndrome.

In hindsight, SARS started in the early weeks of 2003 in Guangdong province. The government initially denied its existence and then underreported cases, as the virus quickly spread out to other regions and countries. Eventually, more than 600 Chinese residents died of SARS. The government's mishandling of the epidemic sparked anger from within and outside of the country.

But the dry facts don't do any justice in revealing what individuals experienced in that crisis. I'm sure everyone has a different story. Mine started with school closings in Beijing.

In the middle of the spring, more SARS cases were confirmed in the nation's capital. Authorities ordered a lockdown of all college and university campuses (yes, they were gated and guarded). Without special permission, nobody could leave or come in. Classes were canceled.

Life became very simple - studying at the library, eating at the school cafeteria, and sleeping in the dorm - until one evening, I injured my right ankle when playing badminton (we were advised to exercise to strengthen our immune systems).

I was immediately sent to the school hospital on campus. After a brief check-up, the doctor taped up my painful and swollen ankle and prescribed pain killer. Fearing of bone damage, I asked for an X-ray exam.

The doctor said: "Are you sure? At this point, we only send suspected SARS patients to the X-ray lab." One major SARS symptom was the buildup of fibrous lung tissue, which shows on X-rays.

So I decided to skip X-rays and use traditional herbal ointments, which were mailed in by a relative outside of Beijing.

In short, it took a year and half to heal that ankle. At the end of the summer, when things came back to normal, I finally had an X-ray, which showed abnormal balance of bone density and slight misalignment. The doctor said the only way to fix it would be to break my ankle again and realign the bones. But I was all set to come to the U.S. for graduate school. I never since had the time (or the courage) for that treatment.

I'm glad that the Chinese government appears to be taking plenty of precaution and maintaining transparency this time. Although China so far doesn't have any confirmed cases of swine flu, health checks are being conducted. National leaders are working with international organizations and other countries to fight swine flu.

Let's hope the outbreak doesn't get much worse.

In an April 29 open letter, the U.S. Business and Industry Council President Kevin L. Kearns rightly pointed out the lack of attention the domestic manufacturing crisis has received in President Obama's first 100 days in office. This trade group takes a very conservative - often protectionist - stance on trade issues, but the letter raised some good points. Here are some excerpts:

Yes, there is a crisis in the financial sector that requires attention, but there is a larger, cascading, and potentially more devastating crisis in the manufacturing sector, which unlike banking actually creates wealth.

To date, your economic team's approach seems to be trillions for banks, but hardly a dime for manufacturing. You save wrong-doing financial houses from failure, but send good-faith, if sometimes poorly run, manufacturing companies into bankruptcy - a formula for disaster.

The current economic crisis is ultimately rooted in America's longstanding failure to produce as much as it consumes. Without doing so, we cannot create the wealth needed to pay our way in the world and ensure a high standard of living for our citizens at home. Debt-financed "prosperity" was an illusion.

The only way forward is for America to make and consume more domestic products, and cut imports and the foreign borrowing necessary to buy them. ...
The solution to our economic problems is not to print enough money to return to the previous unsustainable global trade regime. Rather, we must rebuild those parts of the U.S. economy that actually create wealth within our borders, and therefore restore a prosperity financed by earned income rather than by reckless borrowing.

The same letter condemned foreign countries' "predatory trade practices, including currency manipulation, VAT export rebates, government subsidies, IP theft, industry-government collusion, foreign cartels, dumping, closed markets, etc."

It went on and called for the President to "administer some 'tough love' to our trading partners and a world economy still dangerously addicted to exporting to overextended U.S. consumers." If I'm reading it correctly, it's alluding to the administration's decision to not cite China as a currency manipulator, which is one of those things without quick answers or solutions.

When a nation is faced with both internal and external problems, how should those issues be prioritized for maximized results with limited resources? In the manufacturing case, some real change from the domestic side will be a good start and actually increase the nation's bargaining power in global trade negotiations.

A newly-released blockbuster movie is shaking China. The black-and-white "City of life and death" has a powerful Chinese title "Nanking! Nanking!" and gives the audience and the public an extremely emotional ride.

Nanking - usually spelled Nanjing these days - is a city with rich history. It served as China's capital during six dynasties. The word Nanjing literally means "south capital". When thousands of years of feudalism finally ended in 1911, Nanjing rose again to be the capital of the Republic of China.

Growing up, I paid many visits to Nanjing, about an hour from my hometown. At least a dozen times, I went on school-organized tours to pay tribute to historic sites, including the Memorial Hall of the Nanjing Massacre, which is the main theme of "City of life and death".

The truth is: you can't understand the Chinese people without understanding their history. So much has happened in 5,000 years, including glorious moments and dark times as well. After years of living in the U.S., I've realized that many Americans (and other Westerners) have a hard time sympathizing with Chinese people's feelings toward history. They have legitimate reasons.

From the 1840s to the 1940s, China and its people were invaded, colonized, enslaved and slaughtered. One of the world's earliest and best places of civilization was in the dark for a century. Not long after the People's Republic of China was founded in 1949, the Great Leap movement led to severe famine, followed by the Cultural Revolution that damaged not only economic growth but also cultural heritage and people's values and faith.

All that, associated with shame, anger and distrust, is still vivid in Chinese people's minds. In my eyes, much of China's economic miracle has been created with the will and motivation to make the country strong, independent and respected again.

I know, 1.3 billion people, they are all different. Some people show more patriotism than others. But it will serve you well to keep in mind how Chinese people feel about the past two centuries. If Nike had done so, it wouldn't have come up with the ad featuring LeBron James slaying a Chinese dragon and a kung fu master, which was deemed an insult to China's national dignity. The ad was consequently banned.

Chinese people's emotional sensitivity also stems from the culture. They don't have the sense of American humor. From a Western perspective, they take everything way too seriously. They don't give themselves a break. But that's who they are. That's what history has made them into. Perhaps you can't make sense of it, but please, at least accept it.

We've heard about the rising wages in China's industrial regions and its negative impact on the nation's competitive advantage as a manufacturing base. The labor contract law introduced last year also is believed to be elevating labor cost by mandating worker benefits, for one. So how much really does it cost now to hire an injection press operator?

Certainly the location matters. In Zhejiang province - one of the richest regions on the east coast -- some injection workers are paid a mere 4.3 yuan ($0.63) per hour, according to an investigative report from the Zhejiang Workers' Daily. The employer, Ping Xing Electronic Co. Ltd. in Leqing city, also pays an extra 30 yuan ($4.38) monthly allowance if the worker goes to work for no less than 28 days in that month.

Moreover, the president of the local workers' union admitted that most factories in Hongqiao Township have longer than legal working hours. Many don't provide benefits or written contracts. "Only a few large companies have relatively proper practices."

If the sample is still too small, let's go to the popular job hunting sites. When I searched for injection press operator positions on www.zhaopin.com, a Chinese equivalent of www.monster.com, these results popped up (city, company, monthly wage):

• Suzhou, China Shuheng Pipe Clamp Manufacturing Co. Ltd., 1,000-2,000 yuan (US$146-293)
• Chengdu, Push Medical Plastics Packaging Co. Ltd., 1,000-2,000 yuan (US$146-293)
• Changchun, Joyson Automotive Components Co. Ltd., 1,000-2,000 yuan (US$146-293)

As a matter of the fact, the smaller molding shops that don't recruit through online ads pay even less.

I don't agree with notion that the decline of foreign investment means China is losing its competitiveness against other low-cost manufacturing locations. China's slowdown is a natural response to the global adjustment of over-consumption and overproduction. The abundance of labor supply during a downturn keeps wages even lower.

I do feel bad for the workers. The labor contract law gave them a good opportunity to secure better pay, working terms and benefits, but the global recession disrupted the government's plans to upgrade the economy. Now, where is China going?

Cangzhou Mingzhu Plastic Co. Ltd. announced last week plans to acquire Dezhou Dongli Plastic Co., whose main assets include two biaxially oriented nylon film extrusion lines with combined annual capacity of 9,000 metric tons. Mingzhu has one existing BOPA line and one under construction, each with 4,500 metric tons of annual capacity.

The deal is priced at 112 million yuan, which industry insiders say is a good bargain. "Mingzhu tried to rake up 108 million earlier this year for the 4,500-metric-ton new line," securities analysts said. Publicly-traded Mingzhu said Dongli's two lines are not running due to managerial and technical problems, which will be resolved with Mingzhu's expertise.

Mingzhou is a joint venture between Hebei Cangzhou Dongsu Group Co. Ltd. and Hong Kong Juhong Co. Ltd. It makes polyethylene pipeline systems as well as films. It claims annual processing capacity of 180,000 metric tons. Its second BOPA line is expected to be completed by summer 2010.

Jessica Bellas' new book "Maotai, mooncakes & monks: Misadventures in Hong Kong & China" is not one of those how-to guides. It is a collection of light-spirited essays that vividly reflect an American expatriate's first impressions of and culture shocks mostly in Hong Kong.

The title of the book is quite telling itself. Maotai is a famous brand of high-end Chinese rice liquor often served at business banquets on the mainland. Bellas' demonstrated ability to drink large quantities of Maotai won her a job offer from a government official from Zhejiang province, because toasting Maotai is a fundamental practice that builds bonds and lubricates business and government relations.

The mooncake, on the other hand, is a traditional Chinese pastry for lunar worship and moon watching during the Mid-Autumn Festival. There are many varieties of mooncakes in different regions, and innovative new flavors keep coming out, such as the ice cream mooncake by Häagen-Dazs. Bellas didn't particularly enjoy the Cantonese mooncakes offered by her Hong Kong colleague.

"This must be what it would be like to bite into a hunk of lard," she described the taste of the "bean-flavored, pastry-enclosed lump of jello."

I don't blame her. My own colleagues, the adventurous ones, at Plastics News also found it hard to like the mooncakes I brought to the office. The mooncake is indeed on the top of my own list of "famous Chinese food that Westerns hate." What else is on the list? There is Zongzi, a chunk of glutinous rice stuffed with fillings and wrapped in reed or giant bamboo leaves. People eat Zongzi during the Dragon Boat Festival, commemorating the death of ancient patriot poet Qu Yuan.

What's the story behind monks? Bellas encountered a wild monkey irritated by her photo flash during her tour of Hong Kong's Ten Thousand Buddhas Monastery, which I visited a number of years ago. I'm just glad the angry monkey didn't attack Bellas or anyone else.

The book's subtitle "Misadventures in Hong Kong and China" seems to be hinting that the book is intended for Westerners only. I make this speculation because it's not politically correct to juxtapose "Hong Kong" and "China", at least not from the Mainland perspective, just like how the Americans won't appreciate the saying of "Texas and the U.S."

Adsale the Hong Kong organizer of the Chinaplas trade show, for example, consistently uses the official name of "Hong Kong Special Administration Region." In the English version of its Web site, it refers to Taiwan as "Taiwan", while the Chinese version phrases it "Taiwan province of China." Right or wrong, the matter of fact is, nobody can succeed in China without handling political correctness properly.

Regardless, this book is a refreshing and fun read filled with passion, humor and wit. More information can be found on www.tamcopublishing.com.

As the H1N1 flu has been declared a pandemic by the World Health Organization, NPE2009 is taking precautionary measures, including setting up hand-sanitizer stations throughout Chicago's McCormick Place convention center, having all shuttle buses cleaned daily, and making sure all Chicago hotels have instituted additional cleaning measures.

In a statement issued today, SPI President & CEO William R. Carteaux said: "It is certainly not my intention to make light of concerns regarding the H1N1 pandemic, but the plain fact is that in the United States, aside from a few temporary school closings, the situation continues to be 'business as usual'. The percentage of the total population affected remains less than one-tenth of 1 percent. Furthermore, after thoughtful research based on mathematical modeling, the World Health Organization decided not to restrict global travel because limiting travel would have very little effect on stopping the virus from spreading. Historical records of previous influenza pandemics, as well as experience with SARS, validate this."

The good news is that 30,000 attendees from more than 100 countries have already registered for NPE2009 after the initial media coverage of H1N1. Carteaux said he will bring his entire family and 80 percent of his staff to Chicago for NPE week.

All is encouraging. But just as how many American citizens were culture shocked with China's heavy hand on H1N1 prevention (see PN editor Bob Grace's recent column from Chinaplas called "Taking temperature of the flu outbreak"), I can just imagine how Chinese exhibitors and visitors will be shocked that American airports and convention centers don't take people's temperature, that the authorities don't quarantine people who have had contact with H1N1 patients or those who have fever, that Americans are not very nervous about the pandemic. China and the U.S. have very different legal, political and medical systems, population conditions as well as mentalities.

Let's hope everything goes smoothly at the upcoming NPE show, and everyone remains safe and healthy.

Back in the early summer of 2003, at the tale of the SARS outbreak, Beijing was gradually going back to business as usual.

I was in a cab to go the U.S. embassy in Beijing for a student visa interview. With the rising sun scorching the earth, I started to sweat, because the cab driver insisted leaving the windows open without air conditioning. His excuse was to keep the air flowing to help prevent SARS. But I knew many cab drivers had the habit of not using air conditioning just to save gas.

About 40 minutes later, I arrived in the embassy and joined a long line outside of the gate. I actually arrived early, 90 minutes before my appointment, to make up for the notorious long wait in line. It was not a pleasant experience to stand outside under the summer sun for an hour and half. I also didn't have the wisdom to bring a sun umbrella or a paper fan or to wear casual, short-sleeve summer clothes.

By the time I finished the line and was allowed into the nicely air-conditioned security check room, I thought the day was finally going to move on. But the high-tech temperature monitor on the wall caught me. With a sharp beep sound, a security guard immediately came up: "Your temperature is too high. Go back outside and try to cool down."

I went outside, desperate. How am I going to lower my temperature standing under the sun? With a dozen other fever-suspected applicants next to me, I asked the guard whether we could move to a tree's shade. The answer, of course, was no.

For the next three hours, I tried to meditate and cool myself down with my mind. I was called back to test my temperature several times and failed every time. With the clock ticking, I was almost certain that I was going to miss the visa officers' working hours. They cut off applicants at noon. The next available interview would be 30 days later, and I would for sure to miss the graduate school orientation.

Finally, 10 minutes before noon, a manager-looking man brought us back to the air-conditioned room. "We'll give you one last chance in three minutes. Try to relax and cool down."

Three minutes of air-conditioning worked wonder. All of us passed the security check. And I got my visa that day.

Starting this month, Taiwan is allowing for the first time in six decades direct investment from mainland China to 64 sectors of manufacturing, 25 in services and 11 public infrastructure projects. The plastics industry is included in the list.

A little background: Taiwan has restricted business activities with mainland China since the two sides split at the end of a civil war in 1949. However, since the mainland opened up for Taiwanese investment two decades ago, the amount of Taiwanese investment on the mainland has reached US$77 billion according to official records. Now appears to be the time to balance that flow of money.

But, given China's undisputable advantages in manufacturing, what types of investment opportunities would be able to attract mainland Chinese businesses to invest in Taiwan's plastic manufacturing industry?

When I raised this question to a panel of Taiwanese trade officials at a cross-strait forum in Guangzhou before this year's Chinaplas show, the answer was: "While Taiwanese firms have gained tremendous knowledge of the mainland during the past two decades, the mainland businesses know little about Taiwan's plastic industry and market. In order for them to discover investment opportunities, the first step should be send trade missions to Taiwan for first-hand intelligence."

It doesn't take a trade mission to realize that, compared to mainland China, Taiwan's plastics industry doesn't offer competitive advantages in labor cost, scale of economy, readiness of entire supply chain, local market potential or government incentives/subsidies.

In my opinion, Taiwan's strengths that mainland China hopes to take advantage of lie in the fields of design, high-tech manufacturing and global trade.

When it comes to plastics manufacturing, the most convenient example would be India's antidumping charges on Chinese injection machines. The trade barrier doesn't apply on machines made in Taiwan. Perhaps mainland press makers can start assembling presses in Taiwan and ship them through the South China Sea to India?

I also believe that Taiwan has plenty of reasons to want to work with the mainland, which accounts for more than one-fifth of Taiwan's total foreign trade volume. As Mr. Huang Wenrong with the Taipei World Trade Center put it at the cross-strait conference, buyers from all over the world are doing one-stop shopping in mainland China, threatening regional shows like Taipei Plas. Meantime, Huang said, Taiwan can contribute with its experience in dealing with global downturns, which China lacks.

Local authorities in Guangzhou said last week that a spot check found more than half of the PVC pipes substandard. According to the news report from Guangzhou Daily, the quality inspection agency tested 47 lots of PVC pipes from 15 retailers in the city, and 25 lots failed to meet the standards in terms of gauage, density, strength, light transmittance, etc.

While one spot check may not be the most accurate, I've seen plenty of government, industrial and consumer reports confirming the same problem: the lack of quality and credibility in the Chinese market.
It makes the consumers' role more complicated and difficult, in a retail environment that neither guarantees quality/authenticity nor honors easy return/exchange.

But the key question relates to whether the Chinese consumers are ready to pay a premium for high quality. Last year, after the tainted-baby-milk scandal, many Chinese parents switched to imported formula (not made-in-China Western brands). At one point, when I went to a local post office in Akron, Ohio, to send some baby clothes to my nephew in China, I was asked by a friendly associate: "You are not sending any baby formula? We've seen a lot of that going to China lately."

See, if the Chinese consumers were willing to pay for imported plastic pipes, it would be a win-win. They will finally have the peace of mind, and the North American pipe extruders could make some money.

Don't tell me the shipping cost is the obstacle. If Chinese firms are already importing pipes to North American, it would only make economic sense to ship some made-in-U.S. pipes back across the Pacific in the same containers.

Or am I being too naïve?

The only constant is change, especially in China. Just half a year ago, tens of millions of jobless migrant workers from closed export factories flooded job markets and pushed down wage levels, many ending up going back to their farms and villages. But now, manufacturing hub Shenzhen is suffering from a labor shortage again. City authorities said that the market had 60,000 more jobs than available workers in June.

Japanese electronics and automation manufacturer Omron Corp.'s Shenzhen branch said the labor undersupply started in the second quarter, affecting the company's effort to expand production, according to Shenzhen Business Daily.

To some people's surprise, traditional labor-intensive products, such as garments, luggage and cell phones, are leading the recovery of export sales. Chinese researcher Li Youhuan told 21 Century Business Herald that these categories saw a sharp decline in orders since last October. But consumers in export markets are still buying, and the stock inventory has dried up.

Exports of processed plastics products rose 6 percent in the first half of 2009, according to Guangdong Customs.

The current labor shortage is different than the previous ones, as I believe it is more regional, temporary and limited in scale. The gap between jobs and workers will easily be filled, as soon as potential workers hear of the situation and swing back from their hometowns. Before then, wages may climb up a little, but nothing significant enough to drag the recovery.

I know many of our readers are running factories on the ground in China. What's your observation and take?

Hundreds of disgruntled workers at an injection molding factory in South China decided to go green with their protest against their employer's severance packages. Their act caught the attention of the public and local authorities.

Last week, more than 300 employees of Meiyang Injection Molding Co. Ltd of Shenzhen, Guangdong province, went to pick up litter in a local beach park. Dressed in their uniforms, they were holding flags with the message: "Abandoned workers doing volunteer work," reported by the local newspaper.

Back in March, Meiyang moved to a new location and changed its name. The Japanese-owned company then asked its employees to sign new contracts. More than 600 employees thought the terms were unfair and decided to resign. But the workers found the severance package unacceptable.

Workforce authorities in Shenzhen are now trying to help sort things out between the workers and the company.

Have you heard of Karoshi, the Japanese term for "death from overwork", or occupational sudden death? While Japanese workers have been known for working long hours, the Chinese are definitely catching up if not overtaking them. The long hours, coupled with poor work environment, is resulting in a growing number of sudden deaths in the workplace in cases where employees previously did not show signs of illness.

A recent case in point occurred in a plastics factory in Guangzhou. In the afternoon of August 17, 45-year-old female worker Xian Xiaoqiong passed out next to a molding machine. The factory owner drove her to a nearby community hospital, where Xian was soon pronounced dead from "respiratory failure" in the emergency room.

After the incident, reporters from the Guangzhou Daily went to check out the factory, but the building was shut down with no company name on the outside.

Xian worked for 12 hours straight on the night shift, and started working again at 3:30 p.m. the next day. Her husband told the newspaper that his wife was in good shape. Her coworkers said it was very hot in the factory.

"There used to be a large electric fan at Xian's station, but it was replaced by a smaller one before the tragedy happened," the newspaper reported.

Along the line of Karoshi is the Chinese phrase "pin ming", which literally means to put your life at stake. Many times when I ask Chinese factory owners about China's unique advantage that other emerging countries don't have, they proudly claim: "We Chinese have a pin-ming attitude when it comes to work." In other words, they work to death.

But how much is life worth? How do Chinese people justify risking their lives for a job, especially one that doesn't pay much? Many work with neither proper safety protection nor medical/life insurance at illegal coal mines, toxic battery factories, dangerous construction sites and primitive waste recycling workshops. What are they thinking?

Well, the sad truth is, they don't have much of a choice. They are at the bottom of a society that features an enormous rich-poor gap and a minimal safety network. They risk their lives for the basics - food, clothes, children's tuition and parents' medical expenses, while more and more Chinese enterprises and individuals make those "world's richest" lists.

It's one thing to work to death by preference. It's utterly different when people have to risk their lives just to sustain their lives - and their families'. I wish China gave its citizens an option to not "pin ming."

Factory owners in both the Pearl River Delta and the Yangtze River Delta are feeling the pinch of labor shortage. As orders pile up, they are trying all kinds of methods to recruit workers, including waiting outside bankrupt factories. Some experts say the labor scarcity will last until the fourth quarter.

In Wenzhou, Zhejiang province, workforce authorities said the gap between jobs and workers jumped 21 percent in the second quarter compared to the first quarter. "Last time we saw such severe shortage in the manufacturing industry was in 2005," an official told the 21 Century Business Herald..

Companies and governmental agencies on the east coast have been asking the inland and Western regions to supply more migrant workers. A human resources manager said the company is using all possible channels to find workers, including using job hunters, going to job fairs across the nation, posting ads, requiring existing employees to refer talent, and offering special monthly stipend to prospective workers..

At Hui Li Feng Toy Factory of Donguan, Guangdong province, general manager Dai Xiuying is regretting letting go 200 workers since last October. Now the company only has 100 workers left and is having a hard time recruiting, Qi Lu Evening News reported..

A government official in Chongqing city in West China told a local newspaper that going to the east coast to be a migrant worker is no longer an attractive option, because Beijing has introduced a series of polices to support the agriculture sector and local employment, and also because the export-led manufacturing industry still faces much uncertainty.

While some believe the global recession is coming to an end, Chinese exporters of Christmas products report a sizable drop of orders from Western Europe and North America. But it may not be a bad thing, depending on where you stand.

Huida Christmas Decoration Products Factory in Shenzhen, Guangdong province, told China Central Television (CCTV) that the total value of this year's orders is 40 percent less than 2008. Owner Lin Zhanpeng said the family business started in 1969 in Hong Kong and moved to Shenzhen in 1982. It's the worse situation in many years, he said.

Meantime, Hatfield, UK-based International Greetings plc's Shenzhen factory is busy with Christmas production. General Manager Xu Zhaoren told CCTV, thanks to sales efforts of the company's European headquarters, orders have maintained last year's level. However, average prices are down 20 percent, squeezing the profit to near zero.

A trade group official in Shenzhen estimated that a third of the factories have shut down. Compared to manufacturers, the hundreds of small and midsize trading companies in Shenzhen are having an even more difficult time.

In addition to the major impact of the recession on Western consumers' purchasing preferences, and the fact that China still has a relatively small share of the premium market (which is supposed to be more immune to a recession), analysts point out more internal factors. First, China's export tax rebate for Christmas items was cut from 17 percent to 11 percent on July 1, 2007. Second, the healthy domestic market has convinced many Chinese manufacturers to turn away from export.

I'm wondering though, as the economy turns around, if the 2009 Christmas market might turn out better than expected. Some last-minute orders may become necessary, and production is likely to stay in or come back to North America for the geographical proximity to consumers. This could be good news for U.S. manufacturers, right?

Privately owned PVC pipe manufacturer Zhejiang Ruan's Plastic Industry Co. Ltd. was the hot topic at a recent local job fair in Shaoxing, Zhejiang province. The company posted an ad at its booth touting "managerial positions with annual salaries from 80,000 yuan (US$11,718) to 800,000 yuan (US$117,182), plus perks including housing."

According to local media reports, the company said it didn't receive as many applications as it expected. A human resources representative said the job requirements are high, including at least eight years of experience in the field and outstanding leadership skills.

Since the company gave a wide pay range rather than a specific position that will pay at the high-end range, I suspect the number could be more of a show than reality. The company runs 10 extrusion lines and claimed 2008 sales of about 100 million yuan ($15 million).

One thing to keep in mind, however, is that a Chinese person's annual salary could be just a small part of his/her annual income. Bonuses, allowances and other benefits/perks can easily add up to a couple times of the salary at some Chinese companies and government agencies. At foreign-invested companies, on the other hand, the total income is more in line with the salary. So if you happen to want to find out a Chinese friend's income level (the question "How much money do you make?" is not a social taboo in China), don't just ask about the salary.

One of the 200 million immigrant workers in China has written a book to reflect the life of this special group. Mr. Zhou Shuheng, 31 years of age, spent 17 months on the 450,000-character Chinese-style Peasant Workers.

Zhou referred to his work as a novel. But he admitted that 80 percent of content was based on his own experiences or real stories he had heard.

Zhou became a peasant worker when he was 17. During the next 13 years, he worked many jobs, including plastics factory worker, street vendor, rickshaw cycle rider, building materials salesman, etc.

"I remember, at the plastics factory, I worked 12 hours a day. Monthly salary was 120 yuan (US$17.6). But at the end of the first month, I didn't get a paycheck. Instead I owed the factory 80 yuan (US$11.7)," he told a local newspaper in Fuzhou.

As he wrapped up the book, he started posting some chapters on a Chinese Web site and drew half a million views, as well as many comments. An editor of that Web site decided to help Zhou publish the book. Zhou now is negotiating with several publishers and he expects the book to launch by the end of the year.

How many American companies in the plastics industry have WAP (Wireless Application Protocol) applications that enable easy access to company information from a mobile phone or PDA? A small Chinese company, Anhui Xinli Composites Co. Ltd., has included WAP service as part of its marketing campaign.

Xinli doesn't have its own WAP site per se. Instead, it joined a resin industry WAP site "Anhui Resin Web" that's hosted on China's 12114.org, a mobile messaging domain name directory service platform owned by the Ministry of Industry and Information Technology. Any cell phone user can access "Anhui Resin Web" simply by sending a text message.

Four-year-old Xinli claims annual capacity of 40,000 metric tons of unsaturated polyester resin and 50 million yuan (US$7.3 million) in fixed assets.

On Tuesday November 3, I'll be participating in the China Business Boot Camp in Cleveland. The event is organized by the China Business Network. Its CEO Janet Carmosky is a China veteran and spoke at Plastics News' own China Forum back in 2006.

The panel I'll be moderating features an interesting theme: innovating with trust. In a society where the human factor matters more than systems and rules, nothing can be achieved without trust. Even counterfeiting in China takes a lot of trust. Think about it. A counterfeiter will need trustworthy partners along the entire process of supply, manufacturing and distribution. They have to establish trust with every involved person: factory workers, truck drivers, potential customers, and many more. (Disclaimer: I'm 100 percent supportive of the battle against counterfeiting.)

But innovating in China certainly demands a new level of trust. Still remember the young Chinese worker who committed suicide after a fourth-generation iPhone prototype he was responsible for went missing just a few months ago?

I'll be joined by panelists Mike Maczuzak, founder of industrial design firm SmartShape, Doug Smith, senior vice president of technology at bearings manufacturer Timken, and Allan Goldner, a partner at Benesch, Friedlander, Coplan & Aronoff LLP who heads the law firm's China Group.

The conference's full agenda is available online, including two other panels, a three-hour China orientation by Carmosky, a speech by Len Komoroski, President of Cavaliers (which recently sold a minority ownership stake to a Chinese investment group) and Quicken Loans Arena, as well as a dedicated networking session.

Sounds like fun? Then we'll see you there! I'd love to take this opportunity to meet with our readers in the region. The China Business Network is offering Plastics News readers a special 25 percent discount code. I'll be glad to pass it along, if you send me an email.

If you can't make it to the event but hope to have a question addressed, you can send it to me. I may be able to help you get an answer.

Plastics News editor Bob Grace recently interviewed Chinese car designer Mr. Dong Ruifeng (holding his calligraphy work in the photo), who answered the questions in Chinese. In order to benefit our English-speaking readers, I'm posting the transcript of the video interview here. For our Chinese audience, we will be posting a copy of the video interview on the Chinese-language section of the Plastics News China site.

Q: Please introduce yourself and your company.
A: I'm Dong Ruifeng, founder and owner of automotive design firm - Ruifeng Design - in Shenzhen, Guangdong province. We currently have 320 employees.

Q: How many automotive design firms are there in China?
A: About 37.

Q: And the number of independent Chinese automakers?
A: About 13.

Q: I'd like your impressions of how the Chinese plastic and metal industries have changed over the last 10 or 20 years.
A: China's mold and plastics processing industries have been growing with the entire modern manufacturing sector. The growth rate is rather high in China, because manufacturing is essential to making products, no matter the design is independently innovative, jointly owned by Chinese and foreign investors, or copied. These industries have grown to meet global standards. Since automotive manufacturing involves all kinds of materials and technologies, the fast-growing auto industry in China has bolstered the growth of the entire manufacturing sector.

Q: Can you tell me more about your personal background and how you use calligraphy to influence automotive design?
A: I've never had any Western education. I loved painting during elementary school, middle school and high school. I've also been practicing calligraphy since I was 8 years old. The ideas and inspirations I gained from painting and calligraphy are used both intentionally and subconsciously in my car design. I was in the army for four years. After I graduated from college, I was assigned to work for the First Automotive Works (FAW). Because of the partnership between FAW and Audi, I received training at the Audi design center in Germany. That experience benefited my entire career, as I was exposed to the management, design language, and design methods of the world's most advanced auto design center.

Q: Do other Chinese designer do what you do [apply calligraphy to auto design]?
A: Due to the changes over the past few decades in China, you don't see many people practicing Chinese calligraphy any more. Not every designer can do it. If someone with beginner's knowledge of calligraphy talks about integrating the art into design, that would be a joke. You have to reach a certain level to be able to use it freely. So far, I'm not aware of any other designer doing this.

Q: You won an award at the Shanghai Auto Show earlier this year. Which car was that?
A: I led the design of a super SUV for Chinese automaker Great Wall Motor Co. Ltd. The design received three awards and rave reviews at the auto show. But the awards are for my client, not me.

Q: Is it a concept car or production vehicle?
A: Concept car.

Q: Can you tell us a couple of brands and models of vehicles that are commercialized with your design?
A: You need to understand the realities in China. Chinese automakers would not reveal contract designers for their cars. It's a fundamental term in the contracts. Therefore I cannot comment on your question.

Q: Finally, can you give me your impressions so far of the Industrial Designers Society of America conference, what value you are getting out from participating in Miami?
A: I'm honored to be here attending the conference. I've met excellent designers from all across America and learned a lot from them. I enjoy the friendly atmosphere at the conference and cherish this trip.

Dow Chemical Co. has become an official and exclusive sponsor in chemical and material sciences for the USA Pavilion of World Expo 2010, to be held May 1 through Oct 31 in Shanghai.

According to the event Web site, Dow will offer sustainable products and solutions for the USA pavilion and other Expo projects and showcase its technologies and products such as insulation products, heat transfer fluid, and water purification systems.

Dow is an exclusive supplier of insulation boards to the Eco-House, a unique zero energy consumption building at the Shanghai Expo's Urban Best Practices Area. The Styrofoam will also be used in France's Rhone-Alpes region pavilion for roofing, basement and floor insulation.

According to Dow's corporate Web site, Dow was the first company to sign a contract with the Chinese government to be a volunteer base for the 2010 Expo Exhibition Center. More than 150 Dow employees will volunteer as information guides, among other positions.

The US government signed the official participation contract on July 10, and the steel structure of the 6,000-square-meter pavilion has been finished. Under the theme "Rise to the Challenge," the USA pavilion will present displays featuring sustainability, teamwork, health and more.

When Switzerland unveiled the model of its national pavilion for World Expo Shanghai, the highlights included the very unique exterior decoration - some call it the "interactive and intelligent facade" - to be made of biodegradable resins extracted from soybeans. But the designer has decided to change the material to polycarbonate and here is why.

Valentin Spiess, CEO of design firm iart interactive explains that after the accidental fire at the CCTV tower, China now is paying special attention to building materials' flame resistant properties. Since the CCTV fire was triggered by fireworks, which will be used at the Shanghai World Expo, all buildings are required to be "absolutely resistant to fire," he told www.swissinfo.ch, a Chinese-language Web site owned by SRG SSR idée suisse. For fire safety purposes, Spiess and his team decided to switch to polycarbonate.

(Rendering image by Swiss Pavilion official site)

The red polycarbonate plates will carry dye-sensitized solar cells that are capable of generating electricity and LED lights. These units, attached to a curtain of woven aluminum, will illuminate whenever triggered by surrounding energy, including camera flash.

The units will be protected by individual, clear housing.

At the 106th biannual China Import and Export Fair (Canton Fair), the show organizer reported that the $ value of orders for plastics toys increased by 107.5 percent compared to last fall. Toys were exhibited during the second phase of the fair, Oct 23-27.

In a speech at the recent Asia Manufacturing Forum 2009 in Beijing, an executive from Textron Inc., parent company of blow molder Kautex Textron GmbH & Co. KG, said the company is considering further investment in China.

Martin M. Lin, president of Textron China, said the expansion will support the increasing demand from the nation's automotive industry, according to a transcript of his Chinese speech provided by 163.com. He didn't go into details.

"Our China team achieved 30 percent cost reduction by redesigning tools and work flow," he said, "Localization also helps our customers increase added-value."

Kautex makes plastic fuel tanks at its factories in Changchun, Shanghai and Guangzhou.

Beijing-based Bright East Group Ltd. has started construction of a new plastic optical fiber industrial park in the southwest city of Chongqing with an investment of 2.6 billion yuan (US$381 million).

When finished, the three-year, three-phase project will be equipped with 117 production lines, totaling 2.4 million kilometers (1.5 million miles) of telecommunications-grade fiber in annual capacity. The company expects the facility to create 2,000 jobs and turn out 20 billion yuan (US$2.9 billion) in annual sales.

Bright East features a diverse business portfolio including real estate, advertising, and construction. The optical fiber plant will be the company's first step into plastics manufacturing.

China's domestic market has great potential for plastic optical fiber, which is more cost-effective than glass optical fiber. Until a few years ago, Chinese firms were only able to make plastic optical fiber for illumination, not data transmission purposes.

An existing market player, Jiangxi Dasheng Plastic Optical fiber Co. Ltd., is also planning to expand its capacity. A company executive told a conference in July that Dasheng aims to achieve daily capacity of 100 kilometers (62.1 miles) PPMA optical fiber and also catch up with Japanese industry leaders in terms of quality. Specifically, the company expects to reduce transmission loss from 184 dB/km to 170 dB/km by the end of this year.

Shen Changyu, an expert of plastic molding and tooling, has been elected to the Chinese Academy of Sciences. One of his best-known achievements is the development of the space suit helmets used in China's first space walk last September.

Professor Shen, 46 years of age, is president of Zhengzhou University and director of the National Engineering Research Center for Plastic and Rubber Molds. His research fields include cooling systems for injection molds, and the formation and evolution of microstructures in the molding process.

No more worries about losing paper tickets or plastic admission cards -- the first mobile phone admission system in World Expo history is bound to add a sense of high-tech culture to the Shanghai World Expo. All you will need to tour the event is your cell phone.

The new concept is based on a special type of cell phone SIM card that incorporate radio frequency identification technology (RFID). The Shanghai World Expo Bureau and China Mobile introduced the technology last month.

Users will be able to use the SIM card - which conveniently carries over their existing phone number - to check-in and even make payments in restaurants and shops at the World Expo.

These SIM card tickets are priced the same as regular paper tickets.

This week, the manufacturer of these SIM cards was revealed by a news report from the Jiangnan Evening News.

Jiangsu Changjiang Electronics Technology Co. Ltd. (JCET) of Jiangyin, Jiangsu province, said the production of 3 million World Expo SIM cards began in November and will be completed in four months. Production procedures include the installation of chips, sealing with epoxy resin, cutting, and testing.
Publicly listed JCET said it is adding equipment and improving production lines in preparation for more production of such cards, up to tens of millions, depending on market response.

Maybe Santa Claus decided to cheer up in November. China's Guangdong province, which reportedly makes more than 70 percent of the artificial Christmas trees in the world, said November exports of Christmas-themed items reached US$39 million, 78.2 percent higher than a year ago.

Further data released by the China Customs this week show, however, that Christmas-related export from Guangdong to the U.S. dropped 16.6 percent during the first 11 months, compared to the same period in 2008. The decline rate is 10.3 percent for Canada and 6.1 percent for the European Union.

Meantime, exports to the Association of Southeast Asian Nations soared 87.6 percent.

Regardless of the fluctuation, the U.S. remains the largest buyer of Christmas goods from Guangdong with total spending of US$400 million from Jan.-Nov. 2009, followed by the EU (US$180 million). ASEAN countries imported US$27.3 million in total, less than how much U.S. import decreased in the first 11 months.

The average annual compensation per job in the United States in 2008 failed to keep pace with inflation, growing just 2.6 percent to $56,116. The rate of inflation rose 3.3 percent during that same 12-month period, according to statistics just released by the U.S. Bureau of Economic Analysis (BEA).

The U.S. durable goods manufacturing sector -- those big-ticket items meant to last three years or more -- suffered the largest rate of contraction at minus 2 percent in the 2,265 small U.S. counties covered in the survey.

"Small counties" are defined as those with total compensation of less than US$1 billion. BEA said small counties represent 72.8 percent of all U.S. counties, but only 8.3 percent of total national compensation.

EBA's definition for "compensation" is the sum of wage/salary plus employer contributions for government social insurance, employee pension and insurance funds.

China's plastics processing industry achieved 1.14 trillion yuan (US$166.9 billion) in sales and 64.6 billion yuan (US$9.5 billion) in profit in 2008, according to latest figures from China's National Bureau of Statistics.

That gives the industry an average profit margin of 5.7 percent.

The industry possesses 865.1 billion yuan (US$126.6 billion) in total assets and 468.9 billion yuan (US$68.6 billion) in debt, making the industry-wide equity 39.6 billion yuan (US$ 5.8 billion), the Dec. 25 report said.

The industry consists of 95,000 registered business entities with a total workforce of 3.87 million.

Plastics materials, equipment and recycling are not included in these figures.

The China Business Network recently interviewed me on the phone and produced a podcast with transcript. Click to access the interview.

The 8-minute clip touched upon topics including coal-based plastics, China's pursuit of petrochemical self-sufficiency and my reading of Sinopec surpassing Kraton as the world's largest SBC producer.

I welcome your feedback.

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.

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.

China

The 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.

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.

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)

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.

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.

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.

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."

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.?

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.

Here is my quiz of the day for you: do U.S. households spend the most on A. housewares, B. dairy products, or C. fruits and vegetables?

The answer, according to the International Housewares Association (IHA), is that U.S. households spent more on housewares than on dairy products, and just slightly less than on fruits and vegetables.

In its fresh-off-the-press State of the Industry report, IHA said the average U.S. household spent $609 on housewares in 2008.

Based on data from its annual membership survey and government stats, IHA gave some good insights that may help U.S. manufacturers to better position themselves:

• More than half (58 percent) of IHA member companies produce all their products offshore. Another third (34 percent) make some products in the U.S.
• Virtual retailers distributed 13 percent of the 2008 housewares sales, which was slightly down from 2007, but gains were seen from manufacturers' direct-to-consumer Web sites.
• Housewares manufacturers may need to follow their audiences closely as they "migrate from the traditional print media to online options."
• Consumers are becoming thriftier and more price-sensitive for the immediate future.

I look forward to covering this year's International Housewares Show, scheduled for March 13-16 at Chicago's McCormick Place, with my colleague Rhoda Miel. Our past coverage focused on latest global business and design trends, Made-in-USA products, sustainability, and so on.

Moreover, we plan to do some video reporting at this year's show. We welcome news leads and ideas.

For those who are like me -- struggling with my 2010 New Year's resolutions, let's give ourselves a second chance, with the lunar New Year, also called the Chinese New Year or the Spring Festival -- for it's the start of the spring season on the lunar calendar.

The zodiac sign for 2010 is the fierce, brave and competitive tiger, boding well for the year to come, which, coincidentally, will kick off on Sunday Feb 14, also Saint Valentine's Day.

I'd like to take this opportunity to thank you, our readers, for your continued interest in Plastics News, the PN China sites, and the China Blog, and wish you a prosperous lunar New Year!

The global recession didn't make a dent in the dominance of Chinese products in the global market. According to a column (in Chinese only) on the Chinese Web site of the Wall Street Journal, however, Chinese exports are still in a "miserable" situation.

The author, Liu Gang, defined the "misery" as an extracting but unrewarding task.

On the surface, he said, the Chinese government subsidizes Chinese manufacturers to sell products at lower prices in overseas markets than in the domestic market. Ultimately, it is foreign consumers that Beijing really is subsidizing, while domestic Chinese consumers are charged premium prices for the same products.

"We use our money to subsidize foreign consumers and still get criticized by them, why both?" Liu was quick to answer his own question: "The only benefit is domestic jobs."

Then, why doesn't China replace these export-focused jobs with positions that serve the domestic market? The reasoning usually stops at an ostensible statement: domestic demand is still limited.

Is that really so?

Beijing, as I see it, has been making efforts to boost domestic consumption, by providing subsidies to auto and appliances purchases, for instance.

But the best way to bolster Chinese purchasing power is to reduce the non-manufacturing costs associated with an inefficient distribution/retail system and the lack of trust and credibility.

Why would shrewd Chinese factories export their products for razor-thin profit, when the same products are sold for significantly higher prices in the home market? Because it's a headache to get paid by domestic buyers, companies have told me over and over.

Liu called for the government to take real action to reduce distribution costs and restore business credibility and trust. He even suggested using export subsidies to vouch for domestic payments. That way, he said, made-in-China products will be able increase sales within China, rather than suffering low margin and getting scolded overseas.

Just like how oxo-biodegradable plastics recently raised debates in the U.S., household items that contain melamine, such as tray and plates, have been in the spotlight in China, fueled by the long-lasting quibbling between two Beijing-based trade associations in the past couple of years.

A new round of debate started just before the Chinese New Year, as the International Food Packaging Association labeled melamine trays as potentially dangerous, which prompted a quick response from the China Plastics Processing Industry Association's subdivision of melamine plastic products.

In a news release, CPPIA said the criticism of melamine products is unfounded. "As long as the consumer follow the manufacturer's instruction -- such as avoid using melamine products in a microwave oven and avoid exposing them to high heat, these products are safe." The release called IFPA's warning "misleading."

IFPA, however, pointed out in a Dec 2009 research paper that the use of melamine is not its target of attack. The real problem lies in the widely available substandard "melamine" products in China. The manufacturers of these "fake melamine products" take short cuts by using cheaper urea-formaldehyde resin underneath a thin layer of melamine on the surface.

Even though the Chinese government has been trying to regulate melamine household products by requiring production approvals, the measures have yet shown real effects in fending off subpar products.

IFPA's warning to the public on melamine trays in general has some merit, but since the average consumer has no capacity to evaluate the quality, the warning could adversely affect those companies that make standard quality melamine products.

The biggest question hovering over any Western business looking for partners, suppliers or distributors in China probably is whether the Chinese candidate is trustworthy, reflecting the lack of credibility and a track record system in that nation. The question plagues Chinese domestic companies as well.

The China Plastics Processing Industry Association, a quasi-governmental organization based in Beijing, has started to tackle that problem with an unprecedented "enterprise credit evaluation" program.

According to CPPIA's official documents, with the approval from China's Minister of Commerce, the trade group is working with "third-party experts" to rate plastic firms on a voluntary basis.

CPPIA said the program is not for profit, but to serve the industry. It charges a "preliminary rating fee" of 9,000 yuan (US$1,397), plus other fees in later stages, to initiate such a comprehensive credit evaluation of a business entity.

The first group of 41 companies in the program all received AAA in the preliminary rating, I assume the highest score possible. The list was posted on CPPIA's Web site for public review and comments for 10 days.

While factories in China's manufacturing hub in the Pearl River Delta continue to suffer labor shortage, especially after the Chinese New Year, most companies are not willing to raise wages to attract workers.

A recent survey by the local labor department in Shenzhen's Longgang district reveals that only 15 percent of the 103 surveyed firms plan to give very modest raises. Most of the surveyed companies are plastics and electronic manufacturers, according to a report from Nanfang Daily.

These companies believe that the main reason for the latest labor shortage is limited supply of migrant workers. About 70 percent of these companies said their current headcount is lower than a year ago.

Based on published data, the average monthly wage in Shenzhen was 1,600 yuan (US$234) in 2007 and 1,800 yuan (US$264) in both 2008 and 2009 -- overtime pay included. In other words, wages increased 12.5 percent in 2008 but became stagnant in 2009.

Let the numbers tell the story. Just in Guangdong province, there are shortages of 800,000 workers in Shenzhen, 200,000 in Guangzhou, and 150,000 in Quanzhou. Up north in Wenzhou city, Zhejiang province, that number has hit a million, according to labor bureaus.

The steaming hot labor market has turned 180 degrees from a year ago, when factories laid off millions of workers. For the time being, at least, it looks like many of the migrant workers who lost their jobs and went back to their home villages are not returning to the host cities.

"You can walk into any factory and get a job," a New York Times report quoted a 22-year-old plastics worker in Guangzhou saying.

Manufacturing giant Foxconn Technology Group said it had 50,000 vacant positions after the Chinese New Year. In order to solve the problem, the company told Xinhua News Agency, a referral system was put in place, with on-site recruitment open even during the holidays.

Companies and government officials expect more migrant workers to return after the Feb. 28 Lantern Festival. Shenzhen city is planning to organize 573 job fairs in the next two months.

By definition, a labor shortage forms when the number of jobs outnumbers available workers. On the surface, the giant gap between the two variables has been created in China by fast recovering businesses and unmatched supply of migrant workers.

A Wall Street Journal article looked into the issue in depth and summarized four factors:

1. Structural problem: "Many of the outstanding job vacancies are due to a lack of skilled workers as segments of China's export industry crawl up the value chain." Meantime, younger migrant workers aren't interested in low-paying, physically demanding work.

2. Growing income at home for farmers. "Farming is becoming more rewarding than cleaning skyscraper windows in some places." Some farmers live on rental income of their farmland to large state agricultural enterprises.

3. "...The construction boom and fast economic growth in second-tier inland cities such as Chongqing, Wuhan and Nanchang. Many migrant workers prefer these places because salaries are in some cases almost on par with Shanghai's and it's simply closer to home."

4. Generation gap. While migrant workers in their late 40s or early 50s are gradually returning home, their children, who have been raised in relatively good conditions, are under much less pressure to make hard money in order support themselves or their (smaller) families, thanks to the one child policy.

The analysis is solid, but nonetheless incomplete. A quick glimpse of the 74 comments (all written in Chinese, some by self-claimed migrant workers) on this article reveals one simple, pragmatic problem: low wages and lack of protection.

(To be continued.)

The particular lifestyle of Chinese migrant workers usually is marked by these characteristics:

1. Low base salary, long (paid) overtime all year round;

2. Undesirable living conditions: shared dorm rooms, lousy cafeteria food, etc.;

3. None or insufficient health insurance, social security and other benefits;

4. Difficulty in children's schooling: They are charged extra, lofty fees to go to public schools in the city;

5. Ineligibility for local government-subsidized housing for low-income households;

6. Oftentimes, separation from spouse and family.

During the heydays, migrant workers coped with these hardships, believing the pay back was worthwhile and hoping things would get better. As the global financial crisis battered the export sector, however, their hopes were shattered, leading them to rethink their jobs and life paths.

Here are some thought-provoking readers' comments from the WSJ article I mentioned in my previous post.

The most direct cause of the labor crisis is the fact that many factory owners in the Pearl River Delta vanished overnight. [In 2009, many such cases occurred. Local governments had to intervene and compensate abandoned workers for their overdue wages.]

I live in Shenzhen, where basic-level factory jobs pay 1,000 yuan [US$146.5] a month. That's about twice as much as 15 years ago. But during the same time period, GDP grew fivefold, consumer prices doubled, and housing prices increased 10 times. Therefore, being a migrant worker here is most exhausting and hopeless...

The labor shortage doesn't have much to do with the one-child policy. You can see a lot of people idling around and playing Mahjong, no matter where you go. [It's because the pay is too low.] Government employees make more than 10 times than a factory workers. Unless you are desperate, [who would want to work in a factory?]

Living standards in rural areas have improved a lot. Farmers' income is catching up with low-level city jobs, while the living expenses are very low in small towns and villages. Plus, living in your home village is very relaxing and stress-free. I regret going to college and staying in a big city. My life could have been happier if I had stayed in my hometown.

The so-called labor shortage is a blessing. It shows that people are defending their rights to live a decent life. My company also suffers from lack of workers and we can't finish order on time. But I still am glad for the future of China.

Other comments argued that some college graduates in cities are paid not much more than factory workers, hinting that labor wages are fair. But that's a story for another day - the oversupply of college graduates across China.

A bio-plastic manufacturer in Chengdu, Sichuan province, is ready to take advantage of the China-ASEAN (the Association of Southeast Asian Nations) free trade agreement and increase its export of bio-resin film.

Ye wenbin, general manager of Sichuan Corn-T Biology Technology Co. Ltd., has come up with a business plan to export PLA film to ASEAN countries, where the film is processed into bags and then exported to Europe.

Under the free trade agreement, which started on Jan. 1, China and the six richest ASEAN members -- Brunei, Indonesia, Malaysia, the Philippines, Singapore and Thailand -- eliminated tariffs and barriers to investment on more than 90 percent of the products traded between China and ASEAN, or more than 7,000 products. The zero-tariff status is expected to extend to the four new ASEAN members -- Cambodia, Laos, Myanmar and Vietnam -- by 2015.

Thanks to the zero-tariff, Ye told the Western China Metropolis Daily, orders from Singapore, Thai and Malaysia are on the rise.

Corn-T makes both PLA resin and film, according to a speech Ye gave last year. The company priced PLA film for 30,000 yuan (US$4,394) per metric ton and claimed annual sales of 6 million yuan (US$878,818).

The China-ASEAN free-trade agreement is the world's third-largest regional agreement in terms of economic value, after only the EU and NAFTA.

Tokyo-based Toray Industries Inc. is launching production of PET film for use as a substrate for LCD screen backlight in China. The company also is doubling its manufacturing capacity for such film in South Korea.

According to a Nikkei BP report, the company decided to start making the PET film in China because global LCD display manufacturers expanded there to meet growing local demand.

Toray plans to move a 6,600-ton-per-annum production line from Gifu, Japan to Yihua Toray Polyester Film Co. Ltd., a 50:50 Chinese joint venture with Sinopec Yizheng Chemical Fiber Co. Ltd. in Yizheng, Jiangsu province. The line is scheduled to start running by July 2011.

Toray's wholly owned subsidiary in South Korea, Toray Saehan Inc., will double its annual capacity of the PET film to 36,000 metric tons by adding one production line. Toray said the South Korean government's policy to encourage the use of locally produced materials drives demand.

Total investment for both moves is reported to be 10 billion yen (745 million yuan or US$110 million).

It was obvious that the food storage product manufacturers at the International Housewares Show didn't want anything to do with BPA. They made aggressive marketing effort to state their BPA-free status.

The "BPA-free" label is tagged on virtually any type of food-service item on the show floor: PP containers and lunchboxes, PET bottles, acrylic canisters, and increasingly popular glass jars.

For anyone in the plastic industry, marking a PP container "BPA-free" is probably a little redundant. But, it may be necessary and informative for the average consumer.

That's why when I saw a manufacturer of acrylic storage containers who named themselves -- yes, the company, not just the products -- Free Free USA Inc., I thought they are incorporating the BPA-free message into their name.

But, I was wrong. Apparently, the parent company, Free Free Industrial Corp., was founded in Taiwan back in 1984. And the US division, Free Free USA, was established in 1994.

In 2005, the company changed its name to Felli Housewares, while still doing business as Free Free.

On its Web site, Free Free Industrial claims to be the largest manufacturer of acrylic canisters in the world and sells to more than 70 countries. It owns two injection molding factories on mainland China and one in Taiwan.

Out of curiosity, I tried to find the company's Chinese name and see what exactly the "free free" means. It probably means free as in freedom. It can't mean free of charge.

But I'm not sure. The company's Web site is in English only and my search on Google didn't have any results either.

Regardless, they could definitely leverage the branding potential of the name they picked up 25 years to appeal to chemical-conscious consumers. Why not?

South Korea's LG Electronics has launched its first vacuums - two full-size bagless uprights -- in the U.S. under the LG brand. The company, absent from the recent International Home + Housewares Show in Chicago, claims that it is already a leader in the vacuum category in other markets.

The new units - LuV200 and LuV300 -- feature a radio-frequency wand that allows consumers to control the vacuum remotely when the wand is detached from the base, Homeworld Business magazine wrote in an article published during the housewares show.

The top of the line, LuV300B, touts the industry's longest clean reach with a 40-foot cord and a 15-foot hose as well as certification by the Asthma and Allergy Foundation of America.

LG's entry will intensify the already fierce competition in the U.S. floor care market.

Also in the home appliances category, just days before the March show, a Delaware district court found LG guilt of infringing upon Whirlpool's patent for a refrigerator door ice maker and awarded Whirlpool nearly $1.8 million in damages. Whirlpool said it will seek a permanent injunction against LG when the judgment is finalized later this year.

Brand owners and plastic manufacturers constantly come up with new designs of plastic storage totes, to use the most popular colors, shapes, volumes and other details. But, how much do these features matter to consumers?

A latest online survey coupled with a discussion group by the Homebusiness World magazine presented these interesting findings:

1. Transparency

Transparency is deemed a desirable feature in the discussion group. However, the majority of the survey respondents (67 percent) don't think it is important to see through the tote when storing seasonal clothes.

2. Function vs. fashion

Among the survey respondents, 57 percent believe it is "NOT important" that their laundry storage incorporates a fashion element or coordinates with their home décor, 32 percent "somewhat important", and the rest 11 percent "very important".

Meantime, consumers request a variety of shapes and sizes to best fit their available space and also find tight fitting lids and easy-to-grab handles two musts.

I would like to add one factor that's important for me: the availability of the same model in the near and midterm. Plastic totes are so durable that I still have some from five years ago. It'd be nice to add the exact same units when I need to expand my storage, even if they don't have the latest design features. But that's just me. A survey may just prove that most consumers don't care about it.

Chinese consumers are very different than their American equivalents. I try to avoid making generalizations, but many Chinese consumers are not that sophisticated, due to cultural, historic and economic factors.

Here is an example. Plenty of commercials still tout that products have passed the national standards. "Really, meeting the national standard is a minimum requirement to enter the marketplace, but many consumers believe that makes an exceptionally good product," said Chen Changjie, deputy supervisor of the Plastic Packaging Professional Committee of the China Packaging Federation.

He was speaking at the Industrial Forum on Green Plastics and Rubber during last week's Chinaplas show.

The reason why some consumers misunderstand the "meeting-standards" claim is because decades ago, when modern manufacturing just started in China, being able to meet national standards was a big deal.

At least that's my version of explanation. But the truth is, although China has been making strides in manufacturing, especially for exports, the Chinese domestic market is still filled with subpar products.

I have written in my blog about how widespread counterfeiting is in China, not just of luxury or brand items. Subpar-quality products are even more overwhelming.

The government should take some blame for failing to regulate the market in an effective manner. The consumers also lack the awareness, knowledge, experience and support to defend consumer rights.

Take the possibly toxic foam take-out containers I used the other day. Knowing that the containers were probably mislabeled and low quality, an average consumer doesn't have an efficient way to solve the problem or file a complaint with the authorities.

Of course, I also notice some improvement during this trip. More retailers honor return policies, product design is getting better in general, the availability of foreign products and service is amazing, -- which makes sense given the number of Western expats in places like Shanghai.

In that sense, it's more accurate to state that it's tough to be a grassroots consumer in China. The top of the pyramid should feel just as comfortable as anywhere else in the world.

The best lessons about doing business in China are not necessarily in books, but rather in the fast-changing real life in that country.

I was at the train station in Shanghai with two large suitcases. Since I often encounter escalators in public places that are shut down, maybe to save energy, I felt that just to get myself and my luggage onto the train in time -- with thousands of other passengers - could be a challenge.

So I found help -- professionals who move luggage from the waiting rooms onto the train. They are called the Little Red Hats, for their uniform consists of highly recognizable red hats and vests.

The worker came, loaded my suitcases onto a cart, and asked me to pay the fee. It was 6 yuan per piece, less than a dollar, regardless of the size or weight of the luggage.

After I finished paying at the counter, the worker started walking towards the elevator. He looked upset. I asked if everything was OK. He replied with silence.

Oh well, I thought to myself, just another disgruntled worker. Then he swiped his card to open the elevator, and said quietly: "We get charged every time we use the elevator." It took me a few seconds to realize that he was probably unhappy with the business from me.

His cost to use the elevator for each job is about the same, whether it's for one bag or a cart full of 6-8 bags.

Although tips are not required in China, I slid him a five-yuan bill. Then he started talking.

"During the World Expo, we are told to serve only one customer at a time, so we don't get to use the maximum capacity of the carts." He makes 1,400 yuan (US$205) a month, which is about the monthly rent of a one-bed apartment in the city.

He seemed unhappy with his line of work. The big problem with his company, he said, is that only 25 out of the 70 employees are actual laborers who earn that money.

"Everyone else is in the management, not making money. That's why I get paid so little at the end of the day."

But he was quick to acknowledge the value of the overstaffed management -- these people have good connections with the state-owned railway system. "There's no way for someone without strong connections to compete in this business," he explained, "If the railway company didn't like you, they could set all kinds of obstacles."

The train arrived at the station. He quickly put my luggage in place and left to find the next customer.

How fast has China's plastic industry been growing in the past 15 years? Will the growth slow down in the near future? How important is imported plastic waste for China?

According to Beijing-based China Plastics Processing Industry Association, the Chinese plastic processing industry has been developing at double-digit annualized growth rate since 1996. The global recession hit many export-oriented firms, but industry-wide growth started to pick up in April 2009, thanks to rising demand from the appliance, auto and construction industries.

CPPIA President Liao Zhengpin estimated that the industry will grow 15 percent this year. In the first quarter, sales increased by 33.5 percent and exports by 22.9 percent.

From 2011 to 2015, the output of sizable plastic firms (those with annual sales of no less than 1 million yuan) will double and reach 80 million metric tons, he said at the Chinaplas trade show last month.

Recycled plastic now represents a third of the resin that processors in China consume. The country imported 7.32 million tons of plastic scrap in 2009, along with 10 million tons of recycled plastic generated domestically.

Based on the most recent rounds of talks between Chinese and US officials, the question is no longer whether the Yuan will appreciate, but how much. Some believe that the Chinese currency will rise to 6 yuan against 1 dollar by the end of 2011. The exchange rate currently stands at 6.83.

At a recent resin conference in Hangzhou, Yu Wei, the deputy general manager for Chinese resin trading firm Xiamen Xiangyu Corp., made that prediction, citing other analysts.

A change in that direction will make China more expensive as a destination for foreign direct investment as well as an exporter, which in turn will make China less competitive in the global marketplace. Will that make American manufacturing more competitive? Or will manufacturing move out of China and flow to cheaper regions - such as India? Time will tell.

But Yu made an interesting argument on a strengthening yuan's impact on Chinese domestic market, according to notes by my colleague Steve Toloken, who covered the 2010 China Plastics Industry Conference last week.

In short, a rising yuan will benefit Chinese consumers but hurt the domestic manufacturers. Imported products will become more affordable, giving consumers more purchasing power. Yu said that will help China transform into more of a domestic growth driven model.

Meantime, he acknowledged, competition in China's domestic market will further intensify, and the rising currency could bring speculative ''hot money'' into China, further complicating the market.

For multinational companies with established China operations and expanding local sales, what impact will a strengthening yuan bring? A Shanghai-based Rhodia executive gave his take on the issue.

Frank Laganier, the Zone Director - Asia Pacific for Rhodia Polyamide Engineering Plastics, told Plastics News that a large portion of the company's business in China is driven by domestic consumption (essentially automotive sales). Therefore, "we should not expect a strong impact on the Rhodia EP business in China," he said in a statement.

In fact, the appreciation of the Chinese currency will have a positive effect on the company's turnover from a corporate point of view, when the numbers are converted to dollars or euros, he added.

He acknowledged possible negative impact on some fixed costs linked to the Renminbi, but that would be of "a lower order of magnitude," he said.

Compared to increasing China costs resulted from wage hikes, inflation and the real estate boom, I think, the impact of the currency could remain a minor factor for the time being and the near future.

I've been reluctant to write about the recent labor issues in China. Not that long ago, I mentioned in my blog post the "work-to-death" attitude many Chinese people possess. But it doesn't make the dozen or so suicides at electronics manufacturer Foxconn Technology Group any less shocking.

While the case is under investigation by a team led by central-government specialists, the basic facts are said to be simple: within five months, 13 migrant workers - mostly younger than 30 years of age, some with college degrees - attempted to end their lives by jumping out of Foxconn buildings in Shenzhen, and 11 of them died.

There are different schools of thoughts speculating the possible causes. Foxconn's owner Terry Kuo suspected that some of the workers may have traded their lives for the death-in-service benefit. Foxconn has since given its production line workers a 30 percent pay raise, but the company may have decided to stop compensating suicides, according to some reports.

One popular perspective among Chinese nationals on online discussion forums blames the inhumane work schedule at Foxconn factories: 12 hours per day with night shift rotation, plus overtime on weekend and holidays. The huge amount of overtime bumps up the monthly paycheck, but the hourly rate just touches Shenzhen's minimum wage.

Some may argue that these workers accepted the hectic schedule on a voluntary basis. Nobody forced them. Does that it make the practice right, according to either China's labor laws or just the human common sense?

This week, Apple's Steve Jobs told the All Things Digital Conference that Foxconn's factories are not sweat shops, because they've got restaurants, movie theaters, hospitals and swimming pools. He also stated that Foxconn's suicide rate among its 400,000 workers in Shenzhen is still lower than the national average in the US.

I don't know how many of the dead workers ever had time to check out the movie theaters or swimming pools. But I've seen photos of Foxconn's cafeterias, where thousands of workers quickly feed themselves with food served on stainless steel trays in one large hall. It's hardly anything a Westerner would think of as a "restaurant".

"The food service is very efficient," a self-claimed Foxconn employee said in an online post, "so that we can finish the rituals as soon as possible and go back to the production line."

As for the Apple CEO's seemingly logical comparison of suicide rates, it's really comparing apples with oranges. A fair and scientific evaluation should take into account various factors including at least country/culture, age group, education level, profession, physical and mental health history, use of alcohol and drugs.

Following the Foxconn tragedy, Honda's Chinese workers decided to protest in a less self-sacrificing way. They put on an unprecedented strike that forced the automaker to halt production and eventually to offer a 24 percent raise earlier this week.

A strong wave of manufacturing wage hikes may soon sweep across China, triggered by Foxconn and other major Chinese manufacturers' decision to significantly boost its workers' pay.

If the raises stay and the jobs remain secure, then congratulations to the workers. If that happens, - instead of jobs being transferred to lower cost regions, which some companies say they are already planning, whom do the workers owe their thanks to?

Apparently, Taiwan-based Foxconn is not willing to cover the bill all by itself. Rather, it expects its customers, including big names like Apple, Dell, Sony, Nokia, and Cisco, to pay more for future orders, according to an Associated Press report.

"Many of our customers also have operations, fairly extensive operations in China, so they understand what's going on. So we believe we will be able to have some success with the understanding to be able to offset some of the impact of the salary change," Chairman Samuel Chin of Hong Kong-listed Foxconn International Holdings Ltd. was quoted as saying.

Whether Foxconn and other Chinese manufacturers that have been forced to adjust wages will be able to pass on some of the additional labor cost to brand owners and OEMs is still up in the air, although Foxconn expressed optimism about the upcoming price negotiations to be completed by the third quarter.

If brand owners decide to pass on their cost increases to the end of the value chain, global consumers may face higher prices for manufactured goods.

China's central government is reported to be contemplating plans to double workers' income in the next five years. Some media quoted statistics that demonstrate China's declining percentage of labor cost, in relation to GDP, in the past two decades.

Theoretically, higher income will strengthen Chinese consumers' purchasing power, expand the domestic market, and lessen the country's unhealthy dependency on exports.

Meantime, Foxconn said it's speeding up automation efforts in China, where it currently employs about 800,000. It also has factories in India, Mexico, Brazil, Vietnam and Finland.

Many of the stadium horn vuvuzela used during the World Cup games are made in China, but a South African local firm challenges that.

Toy factories in Chenghai district of Shantou city in Guangdong province have produced millions of plastic vuvuzelas this year, the China Youth Daily quote the local toy manufacturers' association saying. Combined with other Fifa goods such as plastic hats, "this is a good year for toy companies," said a factory owner, whose company is working around the clock to meet orders.

The toy association expects the volume of orders to stay high throughout the year, because the Fifa World Cup is spreading the popularity of the vuvuzela popular to other countries and beyond the soccer game.

Cape Town-based Masincedane Sport, however, questioned the quality of Chinese-made vuvuzelas. "They come free from corporations, or cheap, made in China. They don't blow. Our product has been tarnished," the company was quoted as saying in the Guardian.

Masincedane Sport was formed in 2001 to mass produce the trumpet, which became very popular at football matches in the late 1990s. Co-owner Neil van Schalkwyk was in the plastics industry and decided to develop a plastic version, a Business Report article said.

Schalkwyk said the company has sold 1.5 million vuvuzelas in Europe since October 2009 and expects to generate sales of between $2 million and $2.6 million during the 2010 World Cup.

Fifa has no plans to ban the meter-long plastic horn, despite complaints about the noisemaker.

I am happy to report that the China Blog has been recognized as the second place in New Media-Blog category of the 2010 Ohio Excellence in Journalism Awards.

We received the award at a ceremony held by the Press Club of Cleveland last Friday evening. The judges gave these comments to the China Blog: "Well written and insightful, analytical, well-read by audience, lots of responses."

We thank you all of our loyal readers for being part of this exciting blogging experience in the past three years. We look forward to more interaction and discussions with you in the future.

China failed again to produce a soccer team that could qualify for the World Cup, but a Chinese firm made the list of official sponsors for the first time in history.

YingLi Green Energy Holding Co. Ltd. (NYSE: YGE) is one of the eight 2010 World Cup sponsors. The company in Baoding, Hebei province, makes photovoltaic modules under the Yingli Solar brand. It presented what it calls the first carbon-neutral commercial display in FIFA history at the Soccer City Stadium in Johannesburg. Yingli also provided solar flashlights as giveaways to journalists, for example, at the event. Yingli spent more than a reported $80 million on the sponsorship.

A few more examples of made-in-China products at the World Cup, with at least some plastic content:

1. The official match ball, Adidas Jabulani, is molded from ethylene-vinyl acetate (EVA) and thermoplastic polyurethanes (TPU). The balls are made in China by Taiwan-invested Jiujiang Si Mai Bo Sports Equipment Co. Ltd., using latex bladders made in India, thermoplastic polyurethane-elastomer from Taiwan, ethylene vinyl acetate, isotropic polyester/cotton fabric, glue and ink from China. The company has produced more than 12 million of the Jabulani - which means "bringing joy to everyone" in isiZulu.


2. China Dafeng Industry of Yuyao, Zhejiang, molded more than 40,000 plastic seats for the Nelson Mandela Bay Stadium.


3. Reports say more than 90 percent of the plastic vuvuzelas used at the game are made in China. Chinese manufacturers said the profit averages only 0.20 yuan ($0.03) per piece.


4. Fu Ismail Semiconductor Precision Industry Co. Ltd. in Jiangsu province made for the South African government 50 large outdoor TV screens that measure 20 square meters (215 square feet) each. Fu Ismail is owned by Taiwan's Hon Hai Group. The screens are leased for a total of $1.1 million.

China's 2010 Most Successful Design Awards are calling for entries. Last year's top prize went to the Water Cube - National Aquatic Center in Beijing, an innovative structure that consists of more than 100,000 square meters of ethylene tetrafluoroethylene film.

The awards -- started in 2006 by the Fortune China magazine and Shanghai-based design management consultancy China Bridge International (CBi) -- aim to honor the top international designers and enterprises for their designs that are most successful in the Chinese market, from conception to commercialization. Current organizers include the Shanghai International Creative Industry Week Organizing Committee, Shanghai Industrial Design Association, and Shanghai Creative Industry Center. CBi is the sole operator.

Design companies and teams from all over the world are eligible to enter, including manufacturing and R&D departments that are developing products or designs that either appeared in the Chinese market during 2009, or are scheduled to do so in 2010. The contest covers a wide range of categories, to include products ranging from appliances, automotive, computer equipment, furniture, medical, sporting goods, and the like, to graphic design, apparel and landscape design. The entry deadline is Aug. 15. More information is available here.

In the wake of the recent labor movements in China, a 22-year-old plastics factory worker came out and told the press, "I'd rather suffer [from hard work] in the city than [from a boring life] in the village."

In a long profile feature by the Xinhua News Agency, Mr. Gu Xiaochong said his current lifestyle - working 12 hours a day on a BOPP packaging production line - is far better than harvesting wheat in his home village in Shandong province.

"In the village, people are valued by how much they make," he said.

But what really keeps Gu from going back is the boring rural life and the lack of entertainment. "Even though you have money, you have nowhere to go to spend it."

Gu has been working in the city since he was 16, when he graduated from a technical training school. For the past two years, he has been a line operator at a plastic packaging factory in Tianjin city.

Gu is determined to settle down in the city and has a plan to own a home in the suburbs. He said his parents never ask him for money and have offered to support him financially with the down payment. His father works on construction sites not far from the home village, making 3,000 yuan ($442) a month.

"I make more than that," Gu said with pride. His first job paid 1,200 yuan ($177) a month and the second job 1,300 yuan ($192), both in mid-sized cities. Four years later, he took a friend's advice and came to Tianjin, the sixth largest city in China.

"In smaller cities, some local residents really show discrimination against migrant workers, whereas in a real big city, the line between local and newcomers is faded," he said.

Gu has a girlfriend back in the village, who works at a garment factory. Their communication is all done through cell phone text messages. He dreams of the day when he can buy an apartment in Tianjin, get married and have his wife stay home. He doesn't want her to work hard at a factory, and he said his coworkers share similar plans.

He wants his next generation to attend school in the city, and he wants be more like a "city person".

"They don't just dress well. The way they speak and the way their carry themselves look so educated. I think I need to study more to be like that." To do that, he hopes to get training from the factory and brush up on his English and computer skills.

China will eclipse North America in terms of LCD TV shipments by 2011, with substantial growth from consumers of all levels -- tier-1 cities (population greater than 1 million), tier-2 cities and rural regions.

The China's TV Market Report, recently released by Santa Clara, Calif.-based DisplaySearch, also predicts that flat panel TV (including LCD and plasma) shipments in China will rise from 31 million in 2009 to 59 million in 2014, a compound annual growth rate of 14 percent. Meantime, the share of flat panel TVs in China's TV market will grow from 72 percent in 2009 to around 100 percent in 2014, when CRTs will effectively disappear.

The report analyzes the trends by regional market segments, screen sizes, technology and specific TV features. It also covers the status of TV manufacturing and exports.

Whether the government subsidy incentives for rural consumers bring new opportunities is of particular interest, the company said.

In China, color TV shipments grew rapidly in the mid-1990s, and because the average lifetime of a color (CRT) TV is eight to 10 years, there is an opportunity for the industry to replace these old TVs - nearly 450 million of them - in the next five to 10 years.

China has been ramping up LCD TV production capacity since last year, said a Nikkei BP report. Industry insiders are concerned that an overcapacity will emerge in 2012, when a large amount of domestic and foreign invested capacity comes on stream in China.

There was a slight undersupply of LCD panels from spring 2009 to mid-2010. With the overcapacity looming large, Chinese products will pose a threat to Japanese and South Korean brands, the Nikkei report said.
Chinese domestic brands currently claim 80 percent market share in China.

"Long time, little progress" is probably the best description for the current status of DuPont's largest titanium dioxide investment outside of U.S. borders. Industry rumor has it that the $1 billion project may not see the day of approval.

Back in 2005, DuPont signed a memorandum of intent with the local government in Dongying, Shandong province, hoping to establish a 200,000-metric-ton-per-year facility there and start production in 2010.

"It was a very attractive opportunity for Dongying at the time," commented the Economic Observer News. The deal was going to create 600 jobs and 500 million yuan ($73.8 million) of tax revenue - about one eighth of the total revenue of the Dongying government.

Dongying was quick to reserve 20 square kilometers of land for the project.

In November 2007, the project received an approval from China's State Administration of Environmental Protection (now Ministry of Environmental Protection) and entered the evaluation phase of the Ministry of Land and Resources.

An industry veteran, however, now tells the media that the Ministry of Land and Resources would need an OK from Dongying local government to process such applications.

Coincidentally, the Dongying government went through a personnel change in early 2008, and the new mayor brought into the office a different set of values and policies that highly emphasized eco-friendliness.

DuPont China's government relations manager, Xun Jun, was quoted by the Economic Observer News as saying that DuPont's repeated inquiries to Dongying officials received no response.

Like many places in China, Dongying city has changed a lot in five years. Its 2009 fiscal revenue topped 8 billion yuan. More importantly, the local economy is transforming from petrochemical-dependent to include more sustainable industries especially renewable energy.

Dongying has attracted wind power, solar, and geothermal energy firms from both domestic and abroad, including Datang, Huaneng, Saertex, and Nordex, just to name a few.

At the Yellow River Delta trade talk last month, Dongying secured more than 80 billion yuan of investment from petrochemical, automotive and wind power industries. "Compared to the current volume of investment inflow, DuPont's investment is not as much as it sounded five years," the Economic Observer News commented.

Chinese news media have reported various versions of the investment amount, anywhere from 1 billion yuan to 4.7 billion yuan, but DuPont said the total investment is expected to exceed $1 billion (6.8 billion yuan), according to a position statement on its Web site.

DuPont is the world's largest manufacturer of titanium dioxide, a white pigment widely used in the coatings, plastics and paper industries.

The main concern raised by the Chinese side seemed to center on the environmental impact of the project, especially the waste disposal. The proposed site will employ the chloride technology, which DuPont says has always been preferred by the Chinese government over the sulfate process.

"A feature of the new plant at Dongying will be the use of underground injection (UI) technology to dispose of liquid wastes. DuPont Titanium Technologies has safely and successfully used underground injection wells, also known as deepwells, for nearly 50 years. Injection disposal is a safe and environmentally protective technology. Liquid wastes produced during the titanium dioxide production process are injected deep underground and dispersed into natural geological formations. Typically, over time, the wastes are rendered non-hazardous through naturally occurring chemical processes," DuPont said in the position statement.

The simple fact that the Ministry of Environmental Protection in Beijing has approved the project should have dismissed the questioning and disbelief on the environmental front from the Chinese TiO2 industry, media and public, as far as I'm concerned.

The reports that have quoted Chinese TiO2 makers saying the market is oversupplied are less than accurate, as China continues to import significant amount of high-end TiO2.

DuPont said what it needs now is a business license, in order to get the project started.

The company has so far invested 500 million yuan on the early-stage preparation for the project, which is still up in the air, and it maintains a three-person office in Dongying, the Economic Observer News reported.

Massive storms and flooding in south China are causing damage to all aspects of the society, including manufacturing.

Plastics packaging firms in Tongcheng, Anhui province, for example, said although the floods have subsided in that region, machinery and raw materials in the factories have been severely damaged. They estimated combined loss of 120 million yuan ($17.7 million) for the 60 small plastics companies in the Shuanggang township, according to local media.

Some regions remain on flood alert, as the Yangtze River, China's longest, rises to dangerously high water levels. Millions of residents have been affected, with the death toll in the hundreds and growing.

Warren Buffet once said, "The great personal fortunes in this country weren't built on a portfolio of fifty companies. They were built by someone who identified one wonderful business." But it hardly applies in China, especially as the real state boom creates wealth in an unmatched speed.

Haitian Group, owned by the Zhang family in Ningbo, Zhejiang province, has been very successful with its "one wonderful business" - machinery, including plastic injection molding machines and other industrial equipment.

This year, Haitian established a real estate subsidiary with 125 million yuan ($18.4 million) of registered capital, according to the National Business Daily.

It's not uncommon for Chinese companies that have healthy cash flow from other businesses to dive into real estate. In Zhejiang province, the most entrepreneurial region in China, six of the top 100 privately owned companies have their core business in real estate. But more than 60 others also participate in real estate development beyond their core businesses.

Between 1998 and 2005, the average profit margin of the real estate industry was just 2 percentage points higher than that of the manufacturing sector. However, the gap quickly widened since 2006, and the gross margin of real estate topped 30 percent.

Meantime, manufacturing profitability goes in the other direction, as cost hikes, exchange rate changes, distressed export market, and growing competition further squeeze manufacturers.

Driving the capitalist economy is the search for profits, and it holds true for China.

BASF AG chairman Jurgen Hambrecht, along with other German executives, reiterated concerns and criticism about Chinese policies that they believe put foreign companies at a disadvantage in a meeting with Premier Wen Jiabao.

According to the Wall Street Journal, Hambrecht complained about rules that foreign firms say compel them to transfer valuable intellectual property in order to gain access to the world's largest market.

"That does not exactly correspond to our views of a partnership," said Hambrecht, according to a German reporter present at the meeting.

The meeting took place last Saturday in Xi'an, and included German and Chinese executives as well as Wen and visiting German Chancellor Angela Merkel.

Wen rebutted and said the allegation is untrue.

German executives also raised concerns about Beijing's efforts to limit the export of rare earth minerals, which are used in electric car batteries and other high-tech products. China has the world's largest reserves of some of those elements. Wen promised to remain open on the export issue.

Hambrecht was chairman of the Asia Pacific Committee of German Business until this month.

I was told by my colleagues that the Plastics News China Blog and my name were mentioned in the China Tracker section of forbes.com, in a blog post on why Chinese companies fail in the U.S.

It was two and half years ago when I wrote a post here to comment on an insightful list of the top 10 reasons for such failures, put together by China Law Blog author, Seattle-based international lawyer Dan Harris.

Harris did a new post, Why Chinese Companies Fail in the U.S., Part II, in response to my comments.

Recently, Harris realized that the reasons we discussed in 2008 still hold true. "Chinese companies are still failing in the United States at what I see as an alarming rate -- and the reasons I see for that have not changed a bit," he said in the Forbes.com post.

That's exactly why he reposted the list, along with my comments, and his response to my comments, in this new piece.

The growth of wealth doesn't necessarily change one's mindset, at least not immediately.

While labor issues linger in its coastal manufacturing base in Southeast China, Foxconn Technology Group has quickly taken some of its iPhone production in its new inland factory in Zhengzhou, Henan province.

The Zhengzhou factory started production in a rented building early this week, merely a month after Foxconn registered the company with local authorities.

According to various Chinese media, Foxconn brought more than 500 workers from Shenzhen, in addition to hiring 300 local recruits. The 500 workers from Shenzhen are largely from Henan province and volunteered to work at the new site, a company spokesman said.

Construction of a permanent plant will begin on August 20 at a site near the temporary building. The permanent plant is scheduled to begin production within one year and will make about 200,000 iPhones per day.

Foxconn's strategy -- to move manufacturing to inland regions -- will reduce the existing 400,000 employees at its Shenzhen base to just 100,000.

Analysts say labor costs in Zhengzhou will be comparable to Shenzhen, as Foxconn offers average wages of 2,500 -3,000 yuan ($369-443) per month for qualified workers. However, Foxconn expects to benefit from preferential land costs and tax perks.

The jury is still out on the true causes of the Foxconn workers' suicide incidents, but some believe that workers could be suffering from working far from their families and hometowns. The new Zhengzhu plant may help reduce that emotional distress.

As the temperature tops 105 F in the Yangtze River delta, firms are seeing a temporary rise in wages as well as requests for longer lunch breaks and free summer drinks.

Employers find it especially difficult to recruit plastics injection press operators, construction workers and cooks, among other jobs, according to an official at the Andemen Migrant Worker Market in Nanjing quoted in the Yangtze Evening News.

Many factory buildings in the Yangtze River Delta are not air conditioned.

In order to solve a seasonal worker shortage, companies are offering wages that are 30-50 percent higher than normal.

The Jiangsu Province Job Center released latest data that indicate a 10 percent increase of the number of hiring companies, fewer job applicants and lower recruitment success rate.

Taiwanese-owned plastic supplier Kaedar Electronics Co. announced last week that an unnamed executive in Kunshan, Jiangsu province, had been suspended and investigated for alleged kickbacks to Apple Inc.

Kaedar makes plastic casings for electronic products and has been supplying packaging containers for iPod since 2005.

According to Kaedar's parent company Pegatron Corp., Kaedar paid kickbacks to a third party in order to gain business from Apple prior to its acquisition by Pegatron in late 2008.

It may be a moderate success in terms of economic scale; nevertheless, Bayer AG's recent victory in a Chinese court over a firm that blatantly infringed Bayer's trade name sends a positive message.

The Intermediate People's Court in Quzhou, Zhejiang province, reached a verdict earlier this month, charging Quzhou Baier Sunshine Building Materials Co. Ltd. trade name infringement and unfair competition.

Baier was ordered to change its company name, make a public apology in a newspaper and pay a 200,000 yuan (US$29,378 or 23,171 Euros) fine.

The Chinese characters for "Baier" look the same as Bayer's Chinese name.
Reports said the company was able to register the "Baier Sunshine" name because it was deemed a trade name as a whole. However, the company intentionally left out the "Sunshine" part in its product branding and marketing.

Since Baier's products - plastic boards - are in the same category as those made and marketed by Bayer MaterialScience's Chinese subsidiary Bayer (Beijing) Sheet Co. Ltd., the court concluded that Baier's misleading and deceptive conduct constitutes unfair competition.

It was reported that Baier had received administrative penalties from the local Industrial and Commercial Bureau, but those measures failed to deter the company.

Bayer filed the lawsuit in late 2009.

When I first met Ningbo Lisi Group Co. Ltd. - China's largest exporter of plastic housewares products - at a trade show in Chicago three years ago, they had ambitions about the North American market and were expanding their factories in Zhejiang province.

Then the recession hit. At the 2009 International Housewares Show in Chicago, Chinese exhibitors saw a significant decline of business. A 50-60 drop of orders was considered normal, Lisi said.

But the company is no longer dependent on manufacturing or export. Instead, it is thriving with retail and commercial real state businesses at its headquarters, according to Lisi founder and President Li Lixin, who was featured in a long profile article on the Ningbo Daily Web site.

Lisi now owns six department stores and 34 chain supermarket stores throughout Zhejiang province, the article said.

"You can't wait until the crisis to think about diversification," Li said. He started buying retail businesses in 2005, and continues to invest in commercial estates. His rationale was simple. His goal was to go beyond conventional manufacturing. Since his strength was selling skills, not in other high growth fields such as high-tech, retail was a fit.

But manufacturing will always remain an important part of the company's portfolio. "Manufacturing is not that profitable, but it's the lifeblood. No matter how much money you make in other sectors, you should never give up on the lifeblood," the article described a common mentality among Chinese entrepreneurs.

Seemingly self-contradictory, I believe the saying reflects Chinese business community's firm faith in the "real economy" -- the physical side of the economy dealing with goods, services and resources, as opposed to the financial side -- and especially industrial enterprises.

They don't miss investment opportunities that arise with China's policy-driven, speculative markets. But they also prefer to keep their stakes in solid manufacturing.

Lisi said its current revenue breakdown between manufacturing and the service sector is about half and half.

Cash flow from more profitable new businesses seems to help with Lisi's molding business. The company has invested in 2010 more than 6 million yuan ($884,382) on advanced molds, and launches new products at a fast speed - averaging three to four per day. The focus of his plastics housewares business, Li said, is on creating new distribution channels and phasing out low-added-value products.

A Sept. 15 accident at a Sinopec plastics factory in Zibo, Shandong province killed five workers. The victims include one plastics factory worker and four construction workers - including the project manager -- from a construction company also under the Sinopec umbrella.

According to a spokesman from Sinopec Qilu Petrochemicals Co. Ltd., which owns the plastics factory, a burst of nitrogen gas from a pressurized tank killed the workers -- two died on site, three more later in the hospital. In addition, one worker sustained a minor injury.

While the incident is under further investigation, the company said preliminary findings point to work performed against regulation.

"Some screws on the gas container might have become loose, or workers failed to turn down the gas pressure before fixing the screws," the factory's deputy director Zhao Yanbin told the Xinhua news agency.

The plastic factory contracted with Sinopec Qilu Petrochemical Construction Co. Ltd. to replace a heat-exchange unit, state enterprise Sinopec said. It noted that this particular construction subsidiary branched out in a restructuring and now has private and collective ownership.

Sinopec Qilu Petrochemical also was forced to shut down one furnace at an 800,000-metric-ton-per-year ethylene plant on August 26 due to a small fire caused by oil leak.

A fire at a plastics factory of Nan Ya Plastics Corp., an affiliate of petrochemical giant Formosa Plastics Group, is forcing the company to move some production from Taiwan to the mainland.

The fire didn't cause injuries but burned down part of the factory and warehouse with estimated loss of NT$150 million (US$4.8 million) per month, according to reports from Taiwanese media. The local government also fined the company NT$1 million (US$ 32,310) for fire-related air pollution.

The factory in Chia-yi produces "pearl paper", a type of plastic paper.

Company officials said some production equipment will be temporarily moved to a sister factory in Nantong on the mainland.

Fire also hit two Formosa petrochemical factories in July. Industry insiders speculate that the fire incidents will result in tighter scrutiny over a Formosa olefin factory that had a fire in July and applied to resume production last week. The situation may cause ethylene prices to continue to rise in the spot market, reports quoted analysts say.

Two plastics firms made the latest Forbes' top 50 listed family companies in China.

Janus (Dongguan) Precision Components Co. Ltd., majority-owned by the Wang Jiuquan family in Dongguan, Guangdong province, was ranked 21st. The company was founded in 2003 and launched an initial public offering in May 2010 at ChiNext, a Nasdaq-style growth enterprises board hosted by the Shenzhen Stock Exchange.

Janus makes precision electronics components and molds for leading OEMs including Samsung, Huawei and Haier. Samsung alone represents more than half of Janus' revenues.

Over the past three years, Janus has seen sales grow at a compounded annual rate of 69 percent and net profit 36 percent.

Also included in the list is auto compounder Shanghai PRET Composites Co. Ltd., coming in at 36th. The company was founded in 2007, went public in December 2009, and is majority-owned by the Zhou Wen family.

Sales grew 15 percent annually and net profit 64 percent for PRET in the past three years, reflecting the healthy demand of the booming Chinese auto industry.

According to the first "Chinese Family Business Survey" by Forbes China magazine, as of the end of June, a total of 305 family businesses are listed companies on the Shanghai and Shenzhen stock exchanges, accounting for 36 percent of the total number of listed private enterprises.

The survey shows that the listed family businesses beat listed state enterprises in terms of sales growth and profitability.

More than 60 percent of the polled entrepreneurs hope to have their businesses inherited by the second generation.

A staggering number of Chinese plastics companies have invested - in one way or another -- in the rocketing real estate sector in that country.They include China's largest compounder, the parent company of the largest injection press maker, and many more.

But now a major one, PVC maker Sichuan Jinlu Group Co. Ltd., has decided to divest its real estate business and concentrate on resin manufacturing.

In a recent announcement, Jinlu said it has signed an agreement to sell its 98.26 percent share of Mianyang Xiaodao Construction and Development Co. Ltd. to Chengdu Shilong Industry Co. Ltd. for about 289 million yuan (US$43 million).

The move will help strengthen its main business, Jinlu said in a statement. Xiaodao's profitability has been on the decline since last December, due to government measures designed to cool the real estate sector.

As China's inflation hits a 28-month high, real estate prices as expected to continue to climb, because consumers are likely to continue to invest in multiple homes to counter inflation.

Half of the world's toys are still made in China's Guangdong province, but toymakers there have been complaining about razor-thin profit margins for a while. Some of them are exploring new product categories. Dongguan Jian Sheng Industrial Co. Ltd., for instance, is now making LED light fixtures.

The injection molder has downsized its toy division from more than 5,000 employees at peak time to a few hundred workers right, according to a recent feature story by First Financial Daily.

Chairman Li Weijian said he made the reduction in spite of growing market demand. Costs are creeping up, and he just couldn't find an effective way to ensure profitability.

Li said he started the toy business in 1989 and claims big-name customers including Mattel, Wal Mart, Disney and KFC.

For a while, the company thrived with the scale of production. However, thanks to fluctuating raw material prices, continuous wage hikes, and the strengthening Chinese currency, the risk associated with large-scale, low-margin manufacturing outweighs the reward.

Other challenges include trade barrier and stricter product safety measures by North America and Europe, he said.

A personal experience -- his old friend and toy factory head, Zhang Shuhong, committed suicide during Mattel's massive toy recall in 2007 - also made Li rethink about the toy business.

During the past year, his factory has built 800,000 square meters of manufacturing space for light fixture production and annual production capacity of 1 billion yuan worth of products, Li said.

He sees a great future for exporting energy-saving lamps and a good opportunity to finally build his own brand after decades of custom molding. He believes it's easier to build a brand in a new and fast-growing product category, which the toy business is anything but.

Here are the top 10 stories on the English-language PN China Web site in the past year, based on story clicks. Interestingly, all of them were published in the first quarter - before the very successful Chinaplas and K show coverage. The results might have been affected by factors like the time duration of a story being available online.

• No. 1: Sunningdale reports profit thanks to geographical diversity

This story marks the first time in PN China history when the annual top story features something other than China. A straight forward report on the publicly listed Singapore molder returning to profits, it quoted the company's comments on the regions and sectors that offset the drop in sales from the North American auto industry.


• No. 2: Klöckner Pentaplast invests in Asia and US

The German company added film production capacity in Rayong, Thailand and Rural Retreat, Va.


• No. 3: Taiwan backs plastics research initiatives

During the Taipei Plas Show, our Asia Bureau Chief Steve Toloken interviewed the Taiwan Plastics Industry Development Center, which aims to help plastics firms in higher growth areas like green energy and medical manufacturing.


• No. 4: Chinese PP recycler filing IPO in Australia

While the new ChiNext -- the start-up board modeled after the Nasdaq -- enables more and more plastics companies to go public in China, recycler Novarise Renewable Resources International Ltd. decided to issue an initial public offering on the Australian Securities Exchange to fund its expansion of production and research in China.


• No. 5: Firms find higher-than-expected costs in China's interior

Foreign manufacturers in China are building factories in interior regions as a lower-cost escape from established coastal cities. But some found themselves disappointed with unexpected high labor rates or more supply chain or logistics difficulty.


• No. 6: U.S. moldmakers see China factory as way into local market

China has become more than just the world's low-cost factory, especially since the global financial crisis. The healthy growth and enormous potential of China's domestic market attract foreign companies that hope to grab their share.


• No. 7: Synventive adding second China factory

The Peabody, Mass.-based manufacturer of hot runners and components hoped to double its capacity within two years. Mark Moss, who returned to the U.S. headquarters after his four-plus-year term as Synventive Asia President, spoke exclusively to Plastics News about the details of the expansion.


• No. 8: China's BYD targets North American auto market

The Warren Buffet favorite electric car maker announced plans to launch sales of its all-electric E6 sedan in the U.S. by the end of 2010 and build a U.S. research and development and production facility "soon after that."


• No. 9: Asia alliance aids Thermoforming Systems' global sales

American plastic equipment maker Thermoforming Systems LLC credited its manufacturing partnership with Hong Kong-based Sunwell Machines Co. Ltd. for its success entry to emerging markets like Brazil and India.


• No. 10: Hong Kong toy show exhibit results in yo-yo logo tiff

At Asia's largest toy exhibition, American plastic yoyo maker Duncan Toys found a Chinese competitor with products it believed violated Duncan trademarks. Duncan filed a complaint with the show organizers, but the work to protect its products didn't stop there.

Click here to check out the 10 most-read stories on the Chinese-language PN China Web site.

Beyond this list, please share in the comment what you think were the most significant news events for the plastics industry in 2010.

Just like how Americans go cruising in the Caribbean in the winter, the Chinese flock to the southernmost province in the country, Hainan province. Among them, 1,000+ are employees of injection press giant Haitian Group.

Haitian is spending more than 10 million yuan (US$1.5 million) on company-sponsored, all-inclusive vacation packages for its 6,000 workers, according to the Zhejiang Daily.

Employees and their families are able to choose from six popular tourism destinations in the country. The company flew the first group to Hainan Island, the hottest pick, for a 6-day vacation in two chartered planes on January 5.

Haitian's annual output topped 10 billion yuan (US$1.5 billion) in 2010, the report said. Despite busy production schedules, executives decided to reward the staff for their hard work in the past year with group vacations around the upcoming Chinese New Year/Spring Festival, which starts Feb 3 this year.

That reminds me of the type of all-inclusive, stress-free family vacations my parents' companies used to organize. I always tagged along and had fun playing with all the other children whose parents worked with my parents.

I used to think it was a benefit exclusive to state-owned enterprises and government employees in the old days. But it's more of a Chinese cultural event. Nowadays, privately owned companies and even foreign-invested firms continue to organize these group retreats, where you and your family go site-seeing with all your coworkers and their families.

The time spent together during those trips made me so familiar with some of the families that many years later, I still remember trivial things such as Amy didn't like to brush teeth in the morning, so to speak.

As attractive as an employer-paid vacation sounds, somehow, it's a little hard for me to picture the family-friendly week-long group tour in the American corporate setting. Would you go if offered?

With the real estate boom and rising labor cost in coastal metropolis Shanghai, some companies are transferring their operations to more affordable regions. They are not necessarily moving to inland provinces, as Shanghai's neighboring coastal provinces still offer cost-reduction potential, while providing logistical convenience and a skilled labor pool that interior regions lack.

Shanghai Bestway Plastics Industry Co. Ltd. is one of them. The export-oriented manufacturer of inflatable plastic leisure goods is expanding its production base in Rugao, Jiangsu province, and just launched a 20,000-square-meter injection molding shop. The company plans to increase the number of injection molding presses from 41 to 80, according to local news reports.

Bestway also plans to move its headquarters from Shanghai to Rugao within the next five years, company executive Zhang Yong was quoted as saying.

In a similar case, precision molder Shanghai Cepreh Electronic Co. Ltd. opened its new 30,000-square-meter facility in Huai'an, Jiangsu province, on January 1. The company announced plans to move its current manufacturing operation in Shanghai to Huai'an after the Chinese New Year.

Cepreh supplies electronic connectors to major brands such as Sony, Panasonic and Haier. It estimates that the annual sales of the Huai'an operation will reach 350 million yuan.

In addition to lower wages and land cost, local governments in less developed regions could also offer discounted utilities, tax breaks and other benefits to attract investment and grow local economy and employment.

The dialogue between President Obama and China's President Hu Jintao this week in Washington covered many issues. Most relevant to our industry are the economy and trade, on which they said:

Obama: "We discussed China's progress in moving toward a more market-oriented economy and how we can ensure a strong and balanced global economic recovery. We agreed that in China, this means boosting domestic demand; here in the United States, it means spending less and exporting more."

Hu: "We will continue to appropriately resolve (disagreements in the economic and trade areas) according to the principle of mutual respect and consultation on an equal footing ... We champion free trade and oppose protectionism...."

These are the principles, and specific deals and polices are expected to follow through in the coming months and years.

In a gesture to support the consensus on trade balance, China brought its checkbook, inking deals for aircraft, heavy machinery, agricultural products and software that could be worth $45 billion for U.S. companies and support some 235,000 American jobs.

China also pledged to give U.S. companies more equal treatment, delink its innovation policies from its government procurement preferences, and do more to protect their intellectual property.

It seems to me that this round of talks put a high priority on China allowing U.S. firms that export to China -- and U.S. firms already in China -- to benefit more from the booming Chinese domestic market. There was less emphasis on long-standing and unsolved trade issues like the undervalued Chinese currency.

That's the message for everyone: Try to grab a piece of the Chinese market as quickly as possible. If you can't beat them, join them.

China's environmental tax plan has been submitted to the State Council, according to media reports. If passed, the tax may have an impact on China's manufacturing costs and competitiveness.

The news came from a spokesman for the China Petroleum and Chemical Industry Association, according to a Reuters report.

The tax is likely to be levied on emission of carbon dioxide, waste water, solid waste and sulfur dioxide, Chinese media reported.

Three Chinese ministries have been leading the initiative, including the Ministry of Finance, the Ministry of Environmental Protection and the State Administration of Taxation. But other agencies, such as the Ministry of Water Resources, also are involved.

Presently, China levies a pollutant discharge fee. But the public has grown increasingly concerned with the rapid environmental degradation and over-exploitation of natural resources.

Millions of Chinese migrant workers have returned home, enjoying their family reunions during the Spring Festival this week. But many workers are staying in their host cities for various reasons.

A Feb. 2 Xinhua feature story interviewed a half dozen of workers in Hangzhou, capital city of Zhejiang province.

At a privately owned injection molding factory, workers said the production schedule is so tight that the company only gave them three days off. Most migrant workers rely on lower-cost travel such as the train and bus, and it can take days to return to their hometowns across the vast country.

It's also extremely difficult to get train tickets around this time, and rampant ticket scalping makes the limited number of available tickets less affordable.

For some migrant workers, long distance travel can eat up a big chunk of their savings during the past year. They choose to stay in the factory and wire money home instead.

Migrant workers, especially in the service industry, also find inflated pay rates during the holiday season worthwhile, as city residents and middle class consumers willingly spend more for highly sought after service providers to maintain their usual lifestyle.

Manufacturers in China are experiencing the annual post-Spring-Festival shortage of workers. In addition to higher pay and better benefits, some employers are going out of their way to recruit and retain talent.

Plastic molders in Chongqing city, one of China's booming auto, motorcycle and IT manufacturing centers, forecast a shortage of more than10, 000 workers this year, according to the Chongqing Morning Post.

In order to attract new workers and retain current workforce in a seller's market, companies post ads, offer generous referral bonuses, raise wages and bonuses, and improve medical and retirement benefits.

Some hiring managers take a step further by offering management training, career planning, and, less conventionally, even dating services.

North America's largest PVC pipe extruder JM Eagle has pretty much stayed out of the world's largest market for its products -- China, despite the company's Taiwanese roots. But that is going to change.

The company is sending a clear signal, as its President Walter Wong met yesterday with commercial development officials in Chengdu, the capital city of Sichuan province in Southwest China.

"We hope to bring the best products and technologies that we've developed in the U.S. during the past 20-plues years to the mainland," Wong was cited as saying by a Feb. 17 Chengdu Daily report.

He added an even more aggressive comment, saying that JM Eagle's presence in mainland China, albeit nonexistent presently, will become twice the size of its American operation by the end of the decade, if not sooner.

"[Mainland] China is full of opportunities, we hope to invest here, and Chengdu is a location worth considering," Wong said.

Wong, a U.C. Berkley graduate, said his first job was as a production operator at a circuit board factory under his father Wang Yung Ching's conglomerate Formosa Plastics Group (FPG).

Wong joined JM Manufacturing in 1990, and he boosted the company's sales from US$200 million to more than US$1 billion in 2005, according to the Chengdu Evening News.

He made JM Manufacturing an independent entity from FPG in November 2005, and then formed JM Eagle by merging with PW Eagle Inc. in 2007.

Latest reports and analysis of the impact of Japan's earthquake, tsunami and nuclear leak on the Chinese manufacturing industry point to the following three areas.

1. Supply chain

Chinese manufacturers that reply on raw materials and components from Japan are issuing low inventory warnings. They are scrambling to search for alternative suppliers in other regions.

A case in point is Tianjin Yoshida Co. Ltd, which, according to a Xinhua report, makes plastic packaging products for leading cosmetic brands such as Shiseido, SK II, and Chanel. The company said half of its resin supply came from Japan and current raw materials inventory will last about a month. Yoshida has started contacting resin suppliers in China, but said it remains uncertainty whether it will be able to find materials that match its high standards.

Guangdong Xinhui Meida Nylon, a producer of nylon, nylon filaments and related products, said in a company filing that the earthquake affected its purchase of caprolactam, a chemical which is used to make nylon, affecting its production.

Furthermore, the undersupply of certain commodities and products are driving up global prices, inflating material cost for manufacturers that don't have direct ties with Japanese supplies.

2. Export

Chinese companies that export to Japan may be experiencing disrupted flow of products, due to transportation and business shutdowns on the receiving end in Japan.

3. Opportunities

Some Chinese firms are taking extra production orders that have been transferred from Japan. Other companies benefit from price hikes of their products.

Nippon Polyurethane Industry Co. Ltd., for instance, reported its 400,000-ton MDI plant and 25,000-ton TDI plant in Shunan-Shi are being affected by the earthquake and power outages, according to China's Economic Information. Chinese suppliers such as Yantai Wanhua are expected to see stronger demand and higher prices.

Also see PN's report Japan earthquake and tsunami disrupts materials production.

The growth path of the Chinese economy in the last half-century has been guided by a series of detailed economic development initiatives called the five-year plans. The 12th five-plan, covering 2011-2015, was approved by the PRC National People's Congress on Mar 14.

The upcoming series of blog posts aims to examine the impact and implications of the general plan on the plastics industry as well as specific objectives, directions and policies.

Stay tuned.

Recent media reports quoted anonymous sources saying that Dow Chemical is aiming to sell its PP business. Here is what a Dow spokesman had to say to Plastics News.

"What we have announced to the industry is that we are asking CitiBank to review the options for us -- whether to sell, to buy more, or to expand... Selling is one possibility, I don't deny that. But there has not been a decision yet," said Sudjali Halim, senior marketing manager for plastics, Asia Pacific.

One of the best witnesses of the boom of the Chinese plastics industry in the past few decades is Hong Kong's Adsale Exhibition Services Ltd., organizer of the ever-growing Chinaplas trade show. The following five graphs tell the story.

Click the images below to see full-size photos in new windows.

Chinaplas 2012, which will take place April 18-21 in Shanghai, is expecting 200,000 square meters of exhibition area, more than 2600 exhibitors, and more than 90000 visitors.

A Japanese business executive with extensive experience in China wrote a very interesting column this week for the Nikkei Business Tech-On Web site, telling a story about how a Japanese machinery manufacturer lost a Chinese customer.

Yamada Taro, president of Yourop Corp., said what Japanese sales managers routinely practice in Japan often fails in China.

A Japanese machinery salesman usually starts a dialogue by asking what the customer needs, prefers and for what applications. However, the typical Chinese customer would ignore the questions and ask for a sample for testing without providing any details or specifications.

The Japanese company patiently explains that it is difficult to fulfill that request, as they don't know which equipment from their broad range of products would fit the customer's needs.

Then, Taro-san wrote, the Chinese firm claims that they don't have much understanding themselves and they need a free loaner. The Japanese seller grows suspicion that the Chinese company is not a sincere buyer, only wanting to get their hands on the Japanese machine so that they can have a cheap copy made. So the Japanese firm politely declines by saying "We need to consult with the headquarters" and never getting back to the Chinese buyer.

After a week or so, the Chinese firm nudges the Japanese suppllier, who hesitates to give a definite answer - really, that's the polite way to say no.

Another week passes. The Chinese company calls the Japanese sales manager with the news that they have purchased a machine from another supplier, and a big order of 20 more machines will follow. "We believed that your machines are the best, but we were made to feel that you were unwilling to sell to us, so we had to go with someone else."

Similar mistakes have been made in China many times, Taro-san said. He gives lectures to top universities in China and Japan.

He didn't go on to discuss the issues of mutual trust, intellectual property protection, or cultural differences. Instead, he noted that, with a few exceptions, many Chinese companies still don't have real R&D capabilities. Even many of the large-scale enterprises can only make products based on drawings, but they are unable to create the drawings based on product requirements.

The take-away from this story is that Chinese customers require a lot more education and help than their counterparts in developed countries. They have money to spend and quick decisions to make, so the key is to help them understand and develop what they need.

Lastly, a little thought about the loaner machine. Is there an effective way to prevent the customer from taking it apart and stealing the technology?

Perhaps just another little effort to retain talent in China's highly undersupplied and fluid labor market, an automotive and motorcycle supplier in Zhejiang province is now using a "mood board" to make sure every worker is happy.

Zhejiang Zhenan Vehicle Industry Co. Ltd. set up the board in its injection molding shop, where workers post their moods - sunny, cloudy or rainy, according to a recent report from Zhejiang Daily.

General manager Chen Fenlan noted that injection molding of precision parts requires operators' full concentration. "Good moods benefit both the company and the employees."

One employee posted a rainy mood a few days ago, the company said, which prompted the supervisor to investigate and discover that the employee had difficulty paying his child's tuition. The company chipped in with money from an employees' fund.

Those who believe that smaller manufacturers in China pay no attention to psychological health and safety in the workplace are wrong, the company added.

I wonder whether this idea, or something along the line, would help China's largest employer of migrant labor workers Foxconn to solve its worker suicide problem. Foxconn is Apple's main manufacturing partner. Apple recently banned a game by Italian developer Molleindustria that is believed to be a reference to factory suicides related to Foxconn.

As China's banks continue to tighten lending, and the gray market for credit -- which takes spare cash from households and businesses and lends to small business at relatively high rates -- stumbles, formal sources of private capital have become highly sought after by entrepreneurs.

At a capital matchmaking event in Ningbo, Zhejiang province, last month, a few plastics-related projects managed to attract investment, according to the Ningbo Evening News. A local angel investor offered 5 million yuan (US$780,000) to fund a LED automotive headlamp project. Two institutions decided to jointly invest a total of 44.5 million yuan (US$7 million) in a project that aims to develop energy-saving control systems and servos for injection machines.

Robot maker Ningbo Well-Lih Robots Technology Co. received 21.5 million yuan (US$3.4 million yuan) of investment from Cybernaut (China) Investment to develop high-speed, high-precision, full-servo robots.

An executive from Cybernaut said he chose Well-Lih not only because industrial robots can replace increasingly expensive labor in China and improve product quality, but also because Well-Lih's existing customers include some large firms.

Well-Lih said it had contacted a handful of investors before the event. Cybernaut stood out with its offerings beyond capital -- value-added services such as business planning and talent management.

Well-Lih revealed ambitious plans at Chinaplas to add three assembly plants across China and triple capacity in the next five years (see our archived coverage). Like many other domestic equipment manufacturers, it's essential for Well-Lih to improve its products, rather than replying solely on capacity expansion for growth.

The Society of the Plastics Industry Inc. believes that NPE 2012 can avoid a repeat of the last show in 2009, when several big Japanese machinery firms threatened to pull out of the event during the worst of the global financial crisis, my colleague Steve Toloken reported from Tokyo.

Here is what he wrote:

Those companies ultimately stayed in NPE, after Washington-based SPI cut the fees that companies pay to exhibit.
SPI President Bill Carteaux and Gene Sanders, senior vice president of trade shows and conferences, hosted about 90 Japanese plastics industry officials at a reception in Tokyo during the International Plastic Fair in late October, to thank them and make a pitch for their continued participation in NPE.

Carteaux told Plastics News that "at the current time, all of the [Japanese] majors are in, no one [is] on the fence."

"Our Japanese participation is great," he said. "We have all the majors that were there in 2009 plus some additional. We are thrilled with the support from them."

"That said, we continue to work the market and believe we will continue to build the Japanese presence with some new comers," he said.

Carteaux also told the Japanese crowd that he believed the new location for NPE, in Orlando, will attract more participants from Central and South America, a market he said is "extremely important" to the Japanese. One-third of NPE attendees come from outside the United States, he said.

Toloken also sent me a copy of the script of Carteaux's speech at the reception. I noticed a few graphs that I thought worth sharing with some sentences highlighted:

Contrary to everything you may read in the press, the United States plastics market continues to do well. We continue to see growth in many markets...unless of course you are in housing. Trust me, I don't believe everything the press says about Japan; please don't believe everything you read about the US.

1. Overall US plastic shipments were up to $341 billion in 2010. We are now the 2nd largest manufacturing sector in the country.

2. A favorable exchange rate, and reduced rates for natural gas due to all of the new shale deposits that have been found bode very well for our exports. For the first half of the year exports were up 11% over 2010, which was a very strong year. We had a trade surplus as an industry of over $17 billion last year. China continues to be our third largest export market behind Canada and Mexico.

3. Plastic product production is back up to almost 90% of 2007 levels, before the recession. Our broad base of manufacturers is still very bullish on the future.

Overall, there is a resurgence of manufacturing in the United States for a whole host of reasons, not the least are rising global energy costs and labor in China. ...

Reshoring of products is happening at an increasing rate and major companies are making announcements that they are either building new plants or bringing assembly lines back to the States.

In an interview published Nov. 21 by the Wall Street Journal, Republican presidential candidate and former U.S. ambassador to China Jon Huntsman Jr. stated his position on a number of China affairs, noting that political realities need to be considered when looking at trade issues.

He recommended letting the currency issue "take care of itself" and not wasting years on trying to impose tariffs:

"There are certain things that could make the situation really bad for this country at a time when we can least afford it. I say the currency issue's going to take care of itself.
...
The renminbi has appreciated 30% in the last several years. It will continue to at a rate of maybe 5% to 8%. Because China is driven by its own interests to revalue the renminbi based upon market realities, they will arrive at a point in the years to come where they'll have more of a market-based currency. Whether we tell them to do it or not, they will arrive at that point.
You certainly don't impose tariffs. As a former trade ambassador, I'm not sure how you do it through the World Trade Organization. There's no provision that allows one to do it through the WTO. It's unprecedented. And then what happens? The Chinese will then take the case to the WTO. Two years are wasted on nonsense. And you've blown through bandwidth that otherwise should've been used on intellectual-property protection, expanding market access for financial services and insurance, and working on regional security issues."

He also called for the U.S. manufacturing sector to prepare itself to be able to attract investment that's going to leave a slowing-down China.

"I think the investment dollar that always just lands in China is going to be looking for an alternative. This country would be absolutely nuts if we didn't position ourselves to be that alternative. It's not going to happen overnight, but we can start taking the steps to manufacture here."

It's interesting to see readers' response to the article. As of this moment, the article on WSJ's U.S. main site has only six comments, including five with Chinese surnames. The same article on WSJ's bilingual China site so far has 24 comments, many praising Huntsman's deep understanding of the U.S.-China relationship but also pointing out that that his position on China issues will fail to earn him popularity among U.S. voters.

On the other hand, Huntsman has called China's young generation on the Internet "allies and constituencies within China." In a debate with Mitt Romney earlier this month, Huntsman said:

"There are 500 million internet users in China. And 80 million bloggers. And they are bringing about change, the likes of which is gonna take China down. While we have an opportunity to go up and win back our economic manufacturing muscles. That's all I wanna do as president."

A few of WSJ readers referred to this passage of speech in their comments, warning about his goal to "take China down."

When a U.S presidential candidate receives such response from the Chinese public - mostly from the online community since that's where opinions can be freely expressed, does it mean better or less chances of winning the election? Or maybe there is no correlation at all.

Despite Apple's preference for metal housings for its lightweight notebooks, capacity and cost constraints are pushing the company to switch to alternative materials such as plastic.

According to a recent report from Taiwan's DigiTimes, the ultrabook laptop's traditional aluminum unibody chassis is time-consuming to manufacture. One CNC machine can only produce eight pieces per day.

Catcher Technology, the world's largest unibody chassis maker and Apple's main supplier, was ordered in October by Chinese regulators to shutdown part of its facility in Suzhou, due to complaints about possible pollution from the plant. Even though the plant resumed full production by the end of October, capacity shortages seem to remain an issue.

DigiTimes quoted unnamed industry sources revealing Apple's plans to make three different versions of ultrabook - the high-end version continuing to use the all-metal enclosure, a mid-level model adopting a new design that's plastic in the inside and metal on the outside, and the low-end version featuring enclosures made of fiberglass and plastic.

It is reported that an all-metal enclosure costs $40-80, while the plastic-incorporated new designs cost only $20-30.

When Apple's flagship store in Beijing canceled the launch of iPhone 4S last Friday morning, some angry customers (many reportedly scalpers) who had being waiting overnight in freezing weather threw eggs at the store. That's how popular the iPhones are in China.

Interestingly enough, a Chinese brand meanwhile is rapidly expanding its sales of cheap smartphones in the U.S., so far in a segment that brands like Apple don't appear to focus on.

Despite its current market position of a low-cost product brand, at the Las Vegas Consumer Electronics Show last week, Shenzhen-based Huawei launched what it said was the world's thinnest smartphone. The company told media that it aims to become one of the top three global mobile phone brands by 2015. According to data compiled by NPD Group for the Wall Street Journal, Huawei ranked the seventh of the top 10 smartphones sold to U.S. customers in the third quarter of 2011.

NPD also found that more than half of the Huawei smartphones sold in the U.S. were purchased by consumers with household income of $35,000 or less. That income segment accounts for a quarter of smartphone buyers, the WSJ report said.

Apparently the Chinese brand is taking the lower-income American consumers -- some in households that have no Internet access -- online through affordable smartphones.

The WSJ report said many American consumers can't get their heads around the brand name "Huawei", and some refer to it as "Hawaii."

If Huawei is serious about expanding its presence in the Western market, maybe it could slightly revise its brand name to HW. Just like how its rival LG renamed itself from Lucky-Goldstar back in 1995.

President Ma Ying-jeou's victory to win a second four-year term in office was achieved with strong support from the business community that's heavily invested in the Chinese mainland, including high-profile executives from Hon Hai Precision (Foxconn) and Formosa Plastics Group.

Terry Gou, chairman of Hon Hai, the world's biggest contract electronics manufacturer, toured Taiwan before the election to endorse Ma. It was the first time Gou campaigned for a candidate, according to the Financial Times.Gou gave his Taiwanese employees in China 'election holidays' and chartered flights for them to return to Taiwan to cast their ballot.

Wang Wen-Yun, chief executive of the Formosa Plastics Group, also spoke in public to support Ma's cross-strait policies that focus on peace, stability and economic development.

Taiwan's export-led economy is heavily dependent on trade with the mainland.

What's more important is Taiwanese businesses' direct investment in mainland China. During 2011, Taiwan's authorities approved US$13.1 billion of direct investment in the mainland, a historic high and 7 percent higher than 2010, Xinhua reported. Electronics, computers, and chemicals/materials are among the most popular sectors.