One of the questions for plastics processing companies looking long-term at China is this: Will rapid growth mean there will be enough domestic demand eventually to make the country a viable market on its own, rather than simply an export platform?
Certainly some expect so. Credit Suisse earlier this year projected that China would become the world's second-largest consumer market by 2015 (up from about seventh place now), trailing only the United States.
Harley Seyedin, head of the American Chamber of Commerce in South China, told a plastics industry conference in May that Guangdong Province, next to Hong Kong, has become Rolls Royce plc's third-largest market. And China is expected to become the third-largest U.S. export market later this year.
That sounds impressive. But the country remains a challenging place, and others who've taken a close look are skeptical of its consumer potential. They argue that while the middle class is growing, it's not going to be a major driver of world spending any time soon.
Plastic, of course, is an industrial market, not a consumer one, and most foreign firms come with exports in mind. But as I talk with those plastics firms setting up shop, many also say they want to tap into China's domestic scene.
Arthur Kroeber, head of the Beijing-based economic research firm Dragonomics, offered some basics. Of China's 1.3 billion people, its consumer class is only about 150 million people, with a per capita income of about US$5,000. The U.S. and its 300 million people, by comparison, have a per capita income of about US$43,000.
``You will see forecasts that Chinese consumers will replace U.S. consumers as the engine of global growth in five, or 10 or 20 years,'' he said. ``I just don't think this is true.''
By 2015, China's consumer market will grow to perhaps 300 million, with per capita spending of about US$10,000, he said.
That's significant, he said, but Kroeber argued that most of the people coming in will be at the lower end of the spending, meaning China will remain a volume-driven, price-competitive market.
One area of interest is the country's booming auto market, growing 20-plus percent a year. Kroeber, though, waved the yellow caution flag when he said that many Americans or Europeans assume that because people are buying cars, they're also buying other things.
That's wrong: Rather than buy on credit, he said, people save to buy cars, and while they are doing that, buy as little else as possible.
China is famous as a land of savers, with some estimating that people put away 50 percent of their income. But Shanghai-based consumer market analyst Paul French said saving needs to be seen for what it is, a form of ``voluntary taxation.'' Lacking a strong government safety net, people, in essence, tax themselves to cover health care, education and pension expenses.
That, in turn, breeds what both of them said was a lot of insecurity about personal spending. Which brings back the question: Exactly how do you make money in the hypercompetitive Chinese market?
Steve Toloken is a Plastics News correspondent based in Hong Kong.