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British gentlemen Rupert Hoogewerf quit his accountant job in Shanghai in 1999 and created the "China Rich List" with Forbes. He later struck out on his own [actually Forbes dropped him first] and has since been churning out his own version of rich lists in the popular "Hurun Report" [Hu Run is his Chinese name] magazine. His latest product, the 2008 China Rich List (click to see the English version, which unfortunately has some translation errors compared to the original Chinese list), came out earlier this month. I ran a search for "plastic/resin" in this ranking of the 1,000 wealthiest in China and came up with my list of China's Richest Plastics Businesspeople. Some of the company and individual names may look familiar, as they have appeared in Plastics News. Interestingly, Kingfa is the only company that appeared twice in my list. And Mr. Song Ziming of Kingfa, 40 years of age, is also the youngest in my list. I also found it thought-provoking that, out of the 35 provinces in China, half of the richest plastics people are from Zhejiang province. With a unique regional culture/tradition centered on business and investment, Zhejiang undoubtedly houses many of China's most diligent, ambitious and shrewd entrepreneurs. Now you know where to visit on your next business trip to China, maybe.
As China exports fewer processed plastics products to America in response to the slipping U.S. economy, Thailand is seeing a slowdown in resin demand from China. Bangkok-based KASIKORN Research Center pointed out that Thailand's exports to China only grew 1.4 percent in August, and many product categories are even shrinking, the China News Agency reported. Thailand said that China is importing less chemical products, circuits and refined oil, all important feedstocks for Chinese industries. Resin export also has lost momentum. KASIKORN noted that China is vital for the regional growth in Asia. China is Thailand’s third largest export market, after Japan and the U.S. It seems to me that, compared to during a global boom, people actually get a stronger message during worldwide downturns on how countries and regional markets are closely interwoven in a globalized economy.
In a recent report released by Beijing-based China Industrial Information Issuing Center, Chinese plastics processors, at least the largest ones, still produce decent margins, compared to other manufacturing sectors. According to the study, which analyzed the 500 largest manufacturing companies in China, the plastics processing industry is the third most profitable (11.62 percent), only behind the tobacco industry (17.3 percent) and the beverage industry (15.03 percent). Average margins register at 2.81 percent for telecommunications equipment, 4.77 percent for electrical machinery, 6.93 percent for transportation equipment and 7.38 percent for steel. The industry giants' performance certainly doesn't represent the entire market. The Chinese plastics processing industry, like its U.S. counterpart, consists mostly of small and medium-sized enterprises. The 2007 average margin of China's 500 largest manufacturers was 6.51 percent, almost one percentage point higher than a year ago. The company at the bottom of the list of China's 500 largest manufacturers reported 2007 sales of 5.4 billion yuan (about US$789 million).
Leading Chinese compounder Guangzhou Kingfa Sci & Tech Co. Ltd. has officially acquired a special engineering resin maker Mianyang Dongfang Special Engineering Plastics Co. The deal was priced at less than 300 million yuan. No further details are available. Kingfa has achieved rapid organic growth in the past three years, increasing sales by more than 30 percent annually. The October 1 acquisition marks the company's new expansion strategies as well as its determination of entering the market of specialized engineering resin. Dongfang was founded in August 2003 with a registered capital of 60 million yuan. The company is currently the largest producer of anti-corrosion high density polyethylene that is used in buried steel pipelines and claims annual capacity of 32,000 metric tons, according to Kingfa's announcement. Dongfang's major customers include refiner giants like Petro China, China Petroleum & Chemical Corp (Sinopec) and China National Offshore Oil Corp (CNOOC). As of the end of August, the Mianyang, Sichuan province-based company realized sales and net profit of 315 million yuan and 20.6 million yuan respectively. Guangzhou-based Kingfa said it plans to acquire several more companies "with technologies or products that supplement Kingfa's business" in the next few years.
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.
As China finishes its first spacewalk, here is my rundown of plastic products used in the spaceship Shenzhou-7 and during the spacewalk:
1. Face panel of astronaut's helmet
Professor Shen Changyu, director of China's National Rubber and Plastic Mold Engineering Research Center and president of the Zhengzhou University, led a team to develop the injection molded panel. The unspecified plastic material has excellent UV and radiation-blocking properties in extremely low and high temperatures. [Source: Dahe Online]
2. Polyurethane foam used for temperature control
The China Aviation Technology Group's Division Five, Institutes 501 was in charge of the material development and application. The foam is used on the walls and bulkheads of the spaceship as well as around pipes. The usage of this material has increased 50 percent between Shenzhen-1 and Shenzhen-7. [Source: Xinhua]
3. Coatings
Tianjin Beacon Coatings Industry Development Co. supplied more than 50 grades of coatings, including a variety of colors and functions. The white coating on the exterior of the spacecraft uses more than ten types of materials and went through hundreds of processing procedures, including forming resin. [Source: People's Daily]
4. Multitandem valves of spacesuits
The valves included parts made of specialty plastics and stainless steel. Adhesive researchers at China Aviation Group's Division Seven, Institutes 703 treated the part surface, increased the bonding area, and used extreme-temperature-resistant adhesives. [Source: China Aviation News]
I suppose that plastic can also be found in many panels, instruments, interior as well as the packaging used for food and other purposes in the spaceship.
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.
China's Ministry of Commerce and the China Customs just announced separately that China will continue to impose anti-dumping charges on PVC powder imported from the United States, South Korea, Russia, Japan and Taiwan. A five-year term will take effect on September 29, 2008, when the previous five-year term will end. The duty rates will remain the same, which means, with the exception of Formosa Plastics Co. USA (11 percent), all other U.S. exporters will be subject to 83 percent anti-dumping duties. For further details, email me and get a copy of the Ministry of Commerce's official document in Chinese.
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Since the launch of our Plastics News China eWeekly newsletter and related Web site in June 2005, I've been receiving e-mails and phone calls from readers who would like to discuss news events and industry trends with me. This blog is to provide a platform to facilitate such communication. I invite you to come here often, read about the latest happenings and discuss them with me as well as with industry friends all across the globe. I welcome your comments and opinions.
Nina Ying Sun
Plastics News
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