Strong performance released July 17 by Chen Hsong Holdings Ltd. injected momentum of the press giants stock price on the Hong Kong Stock Exchange (0057.HK).

The company said fiscal year 2006, which ended March 31, 2007, saw sales up 10 percent and profits up 15 percent.

According to the ET Net, who claims to the largest financial news provider, Chen Hsong cited oil pricing a major factor for its sales. Sales only grew 8 percent in the first half due to high oil prices but went up 14 percent in the second half as oil prices dropped, the company said.

Chen Hsong stock hit a 52-week high on July 18, the following trading day.

The upbeat trend in 2007 is also found on the stocks of Haitian International Holdings Ltd. and Cosmo Machinery Enterprises Ltd., the other two largest press makers in China.

In the following chart compiled with Yahoo Finance, the blue line is Chen Hsong, green Haitian and red Cosmo. For a better view of the chart, click to open a larger version in a new window.

For background information, read PN's fresh report India probes allegation of China injection press dumping.

It's not the first trade dispute between the two of world's fastest-growing economies, but the anti-dumping investigation India's Ministry of Commerce is starting on Chinese injection presses is quite interesting and may have significant fall-out.

In the official notification, the Indian government not only mentioned the applicant L&T Demag Plastic Machinery Ltd. of Chennai, but also specifically noted that "there are three other companies which are known to have the capacities to produce the subject goods in India: Ferromatik Milacron India Ltd. of Ahmedabad, Windsor Machines Ltd. of Thane and Electronica Machine Tools Ltd. of Pune."

Maybe the government believed that these three companies -- all non-applicants -- are major domestic players in the field. But note the significant foreign ownership in these enterprises. L&T Demag and Ferromatik Milacron India are foreign-invested, and Windsor used to be foreign-invested. The only local company, Electronica, makes just 100 machines of its own per year, and imports 400 presses from China's Haitian Group.

Machinery industry sources said that the biggest Chinese brands sold in India appear to be Ningbo Haitian Group Ltd. of Ningbo; Zhejiang Sound Machinery Manufacture Co. Ltd. in Hangzhou, Zhejiang province; and Chen Hsong Group of Hong Kong.

At least two of the big three, Haitian and Sound, already have assembly facilities in India. So if penalties were imposed to whole presses, Haitian and Sound could ship parts to India and assemble machines locally. Other companies can certainly follow the suit.

Of course, jobs and investment will come with the assembly work from China to India. India wouldn't mind that.

The probe could also have an impact on Chinese participation in the big PlastIndia show, coming up Feb. 4-9, 2009, in New Delhi, according to an Indian source who talked to one of our reporters. And the two countries currently plan to organize an India-China Plastics Summit in conjunction with that show. This move could add a new dynamic to those proceedings.

I'm having a hard time immediately finding how many Chinese exhibitors participated in the last PlastIndia show, in 2006. But I've not been impressed with the Indian presence at Chinaplas -- Asia's largest plastics show. There were only six Indian exhibitors at Chinaplas earlier this year, down from nine in 2007.

We'll watch it closely and keep you updated.

China's largest injection press maker, Ningbo Haitian Group Ltd., had the perfect opportunity to let go of more than 200 workers whose contracts just expired. Especially since, as a result of the global recession, Haitian's output plummeted 70 percent in November and December. It would have been a good time to reduce headcount, seeing as a whopping 70 percent of the firm's 3,500 employees didn't even have any work to do.

"Not renewing the contracts could have saved the company millions of yuan," General Manager Zhang Jianming told Zhejiang Daily, "but it's so hard to find a new job right now that these workers may face real life hardship."

So Haitian went ahead and renewed the contracts. Each employee has work to do for at least one week every month, and the rest of the time is paid time off.

The workers expressed their gratitude for no pink slips by volunteering pay cuts, and product development and sales staffers worked long hours and on the weekend. Now, it looks like the efforts are paying off. The company said it secured 10 million yuan in domestic orders the first week of the New Year.

Nothing wins Chinese employees' hearts and loyalty more than job security, especially right before the Chinese lunar New Year holiday. How long will Haitian be willing and able to afford employees working one week every month? Will sales turn around after the lunar New Year, as the company forecasts? We will keep a close eye on it.

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.

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.

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.

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."

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.

On this coming Saturday, August 1, 2009, China's new regulations on media reproduction will take effect. Compared to the previous version (enacted in 1996), the new regulatory policy is tightening the control of media reproduction equipment, including high-precision injection molding machines.

Under the new law, a government approval must be in place for any purchase, import, addition or modification of media storage disc manufacturing equipment. The General Administration of Press and Publication (GAPP) is the administrative agency responsible for drafting and enforcing the regulations.

It's worth noting that GAPP is actually the same agency as the National Copyright Administration (NCAC), which is typical China's "one agency, two nameplates" structure.

According to the new regulations, the purchase, import, addition or modification of manufacturing equipment for read-only CD/DVDs must apply for approval from GAPP in Beijing. GAPP's provincial level branches will be regulating the purchase, import, addition or modification of manufacturing equipment for writable CD/DVDs.

Equipment manufacturers in China are required to report the production and sale of any CD/DVD reproduction equipment within 30 days.

It'll be interesting to see whether this new regulation will be strictly enforced and whether it will in any way affect the high-precision injection press market.

(The GAPP Web site is currently down. I'll post the URL of the new law once the site is back online.)

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.