AKRON, OHIO (June 27. 10:55 a.m. EDT) — Liao Zhengpin has served for the past eight years as president of the Beijing-based China Plastics Processing Industry Association, which says it has about 8,000 member companies.
Liao has been involved in the development of China's plastics industry since 1964, when he joined the Plastics Bureau of the State Light Industry Ministry. He also currently is acting as director of the National Plastic Product Standardization Technical Committee.
He also has experience in supporting the development of remote areas, like the Tibet Autonomous Region and Inner Mongolia Autonomous Region.
Considering the changes in China in the last 40 years, Liao has seen tremendous change, which he described as “rapidly growing up from a small scale.”
Liao agreed recently to reply by e-mail in Chinese to questions posed by Plastics News reporter Nina Ying Sun. A translated, edited transcript follows.
Q: How would you describe the biggest challenges facing China's plastics processing industry in the near term?
Liao: In short, there should be mainly two aspects: one is constantly rising material prices, which affects the margin of processors and makes some products unprofitable; the other is insufficiency in research and development investment, which affects “harmonious development.”
Q: How best will those challenges be addressed?
Liao: For the first one [rising prices], it relies on the regulation of the government. In addition, it is also important for processors to enhance communication and coordination with upstream resin enterprises and downstream users.
For the second one [insufficient R&D], I refer to development that is healthy, stable and sustainable. Only that kind of development can be called harmonious development, which implies two things: harmony of the company itself, and harmony of the entire industry.
Currently, for both the enterprise and the industry, insufficient investment in R&D and lack of vision are quite prevalent and most challenging. There is no innovation without R&D. Only by improving the innovativeness can we find the right way for development. The only way to avoid similarity and malignant competition is to be original and creative. This is undoubtedly a big challenge anyhow.
Q: You said recently that the growth of the plastics processing industry is closely associated with the gross domestic product growth rate. As we all know, China plans to slow its GDP growth. How might this affect the plastics industry?
Liao: The government's warning of an overheating economy and its focus on “green GDP” [sustainable development] are based on the guideline of “scientific development” and “human orientation,” which will have substantial impact on certain industries, including the plastics industry.
The problem of most concern for environmental protection is the impact of waste on the environment. However, from another point of view, this may also force enterprises to seek new development. For example, the state advocates and enforces energy savings in construction, which will greatly promote the development of foam plastic in the Chinese plastics industry, especially in the polyurethane foam industry, which may contribute greatly to energy savings in buildings.
Q: China's plastics processing industry has maintained a double-digit annual growth rate since 1996. It has exceeded 20 percent a year since 2003 and reached 30 percent in 2005. Do you have any concerns about the industry — or the general economy — growing too fast? What is your estimate for the industry's growth rate for 2006 and the rest of the decade?
Liao: About this, I should say it is both a blessing and a curse. First, the rapid development of the Chinese plastics industry has played an increasingly important role in the national economy of China. For instance, the output of the plastics processing industry currently ranks among the top three in the light industry of China for several years in a row, and this also indicates the huge demand for plastic material, plastic products and plastics machinery in the Chinese market.
However, over-accelerated growth of the plastics industry will also bring a number of problems. For products with a good market prospect, a lot of enterprises will swarm in and thus cause serious redundancy and, consequently, malignant competition.
I have stressed this problem on many occasions, in the hope of drawing attention to it. The China Plastics Processing Industry Association also has done a great deal of work, hoping to maintain healthy, stable and sustainable development of the industry through macro-regulation by national industry policy and guidance, and self-discipline of the plastics industry association. I believe the Chinese plastics industry will keep its fast growth in the near future. However, with the market gradually becoming more mature, the growth will tend to be more rational.
Q: Chinese imports of polyethylene and polypropylene resins were below expectations in 2004 and 2005, according to government data. That led some to suggest the Chinese plastics market had weakened. But others assert that is incorrect. They say that, as virgin resin prices soared, China became the world's largest importer of scrap and recycled polymers, and the country's domestic recycling market accelerated sharply. Who's right? What is your view of the plastics recycling trends in China?
Liao: Imports of polyethylene and polypropylene being lower than predicted was caused first by rising material prices and secondly by the fact that several large PE and PP processing plants have been established in China in order to meet the demand of some domestic manufacturers.
China is the largest importer of plastic scrap and recycled resin in the world because of its large market and demand. China has always adhered to the policy of collecting and recycling used material, which also is consistent with the world trend of a recycling economy. The China Plastics Processing Industry Association has been supporting and advocating this trend that benefits the country and the people, and has even established a Plastics Recycle and Reuse Committee to guide the recycling of waste plastics, and the development is positive and effective in general.
Q: Bioresins have gained much attention in China in recent years. What is the market scale of the bioresin industry in China? Who are the major players? In addition to local producers, it is reported that BASF AG and NatureWorks LLC have developed technology partnerships with Chinese companies. And several universities are commercializing their bioresin research results. Would you elaborate on this topic?
Liao: Firstly, bioplastic is a new thing, which has brought brightness to us, in a world that is running out of natural resources. Plastic is largely used in packaging; however, the recovery of it is difficult as it is discarded after use. As a result, bioplastic will have great potential in this field.
Secondly, China will host the 2008 Olympic Games, and one of the slogans is “Green Olympics.” Boosted by the concept of environmental friendliness and its huge business opportunity, the market of bioplastic is becoming more and more heated. As far as I know, the Beijing Olympic Organization Committee has held several seminars and exhibitions to bid for environmentally friendly products for the Olympics, of which plastic tableware has accounted for a large proportion.
Currently, institutes and enterprises in Beijing, Tianjin, eastern China, southern China and Wuhan have been engaged in such works. BASF, NatureWorks and some Taiwanese companies have also conducted technical cooperation and made investment in China, which will greatly boost the bioplastic industry of China.
Q: Jiangsu province has lost some share of China's plastics production market, while Guangdong and Zhejiang remain stable. But the northern areas are catching up, including Shandong, Hebei, Henan and Liaoning. How do you see the dynamics of regional growth and competition? What about the potential in other less-developed regions in China?
Liao: Considered as a normal phenomenon, such regional competition and growth will benefit the overall development of the Chinese plastics industry. Less-developed regions enjoy enormous market development potential, while Guangdong, Zhejiang and the southeastern coastal areas have better technology and products. Should these two be combined to complement each other, the Chinese plastics industry will achieve greater development. Western China is dry and lacks water. As far as agriculture is concerned, if plastics could be widely applied in water reservation and water-saving irrigation, great economic benefit will be achieved.
Q: Instead of working with multinational original equipment man-ufacturers, many Chinese firms are starting to go it alone in the international markets. In addition to offering a low price, some also are advancing technologies, integrating designs and building their brands. Do you have some good examples? What advice and suggestions would you offer them?
Liao: There are many such examples. For instance, Haitian Group, Nanjing Keya Group, Jingcheng Mold Machinery Co. Ltd., Sanjia Mold Group, etc. I hope that these enterprises pay more attention to learning enterprise management, mastering advanced technology, researching and developing more advanced products, and forging China's own brand in their expedition to other parts of the world.
Q: Intellectual property protection has been a concern for many foreign investors and prevented some from setting up R&D facilities in China. Would you summarize the current IP regulation and enforcement situation, especially those related to the plastics industry?
Liao: Some companies have even moved their R&D center originally located in southeastern Asia to China, which implies two things — one is that the Chinese market is attractive, and the other is that China's intellectual property protection environment is improving. However, improvement does not mean perfection.
Intellectual property is an issue of concern to all the countries engaged in international communication and trade. It is normal to have differences or even some friction on this issue. What I would like to say is that the Chinese government has attached great importance to the protection of intellectual property, and the State Council has set up a dedicated office for intellectual property protection. As the Chinese plastics industry is developing fast, and international communication is growing, the CPPIA will stress protection of intellectual property in either importing or exporting.
Q: Chinese processors and machinery makers have not thrived on proprietary technologies. In the past, they have focused on producing knockoff products and competing on volume while struggling with low profitability. What steps should they take to switch to a more innovative path, create more value on less resource and overcome the negative reputation?
Liao: What you said is the past. The situation now is being changed, and great achievements have been made. Let's look at some examples:
* Electromagnetic dynamic extrusion, injection, blow molding equipment and technology invented by the South China University of Technology has registered patents in 12 countries and regions around the world, and achieved a milestone breakthrough in polymer processing and manufacturing and application.
* Guangdong Hongli Machine Co. Ltd. has successfully developed a four-cylinder, two-platen injection press, creating its own features in precise injection molding technology. This patent has been registered in eight countries and regions, including Europe, America and Japan.
* The hot-melt welder for large HDPE pipes, jointly developed by Maple Commercial Group and relevant research institutes, has reached plus or minus 2° C temperature control on its hot melt plate, higher than the standard precision (temperature control plus or minus 10° C ) achieved with similar products in the world.
* In addition, a number of enterprises such as Ningbo Fangli, Nanjing Koperion Keya, Dalian Sanlei, etc., are developing innovative products with independent intellectual property, and their production technology and equipment also feature breakthroughs and innovations.
This indicates that Chinese enterprises attach great importance to the development of new technology and product and are moving onto the path of innovation step by step.
Q: We understand you will be attending the NPE 2006 trade show. How big a delegation do you hope to bring with you, and what do you hope to achieve there?
Liao: NPE, as an influential international exhibition, will attract lots of Chinese enterprises to attend.
The CPPIA delegation led by me consists of nearly 20 people, mostly coming from backbone plastic processing enterprises.
We will extensively communicate with plastics associations and enterprises from other countries, helping more foreign enterprises to learn about the Chinese plastics industry, and involve them in the development of the Chinese plastic market, especially the market in Western China.