Skip to main content
Sister Publication Links
  • Sustainable Plastics
  • Plastics News China
  • Rubber & Plastics News
logo-pn-color
Subscribe
  • Login
  • Register
  • Subscribe
  • News
    • Processor News
    • Suppliers
    • More News
    • End Markets
    • FYI Charts
    • LSR World
    • Multimedia
    • NPE2021
    • K Show
    • ENGEL Sponsored Content
    • Special Reports
    • Top materials of injection molders
      Recycled PET use by product category
      US PET, flexible packaging desintations
      Global fluropolymers additives market: CAGR
    • Exhibitors back NPE cancellation: ‘We couldn't take that risk'
      NPE2021 canceled as in-person event
      NPE reviews its options as pandemic prompts exhibitor to exit
      Machine builders meet pressing needs for plastic in 2020
    • Sponsored By ENGEL Machinery
      Tailored maintenance for injection molding machines and robots
      Sponsored By ENGEL Machinery
      Improve maintenance efficiency with e-connect.monitor
      Sponsored By ENGEL Machinery
      Maximum precision for lowest shot weights
      Sponsored By ENGEL Machinery
      Even more cost effectiveness for small precision parts
    • Injection Molding
    • Blow Molding
    • Film & Sheet
    • Pipe/Profile/Tubing
    • Rotomolding
    • Thermoforming
    • Recycling
    • Machinery
    • Materials
    • Molds/Tooling
    • Product news
    • Design
    • What Keeps You Up At Night
    • Mergers & Acquisitions
    • Sustainability
    • Public Policy
    • Material Insights Videos
    • Numbers that Matter
    • Polymer Points Live
    • Automotive
    • Packaging
    • Medical
    • Consumer Products
    • Construction
    • Videos
    • Galleries
    • Podcasts
    • CEO Issue
    • Best Places to Work
    • Processor of the Year
    • Rising Stars
    • Women Breaking the Mold
  • Opinion
    • The Plastics Blog
    • Kickstart
    • Heavy Metal
    • One Good Resin
    • BRICS and Plastics
    • All Things Data
    • Viewpoint
    • Perspective
    • Mailbag
    • Watching, and hoping, for progress in 2021
      COVID-19 stories dominate 2020 headlines
      Plastic Globes ask: Was there a lighter side in 2020?
      Compounders write a business survival story in 2020
    • Kickstart: Welcome to the VUCA economy
      Let's get social
      Kickstart: A Corvette crossover? No thanks
      Kickstart: Another push to reduce plastic packaging
    • Heavy Metal: Coronavirus edition, plus the work of working from home
      Don't put off succession planning
      What's a good gift for your cobot? Batteries?
      Here's some big ideas to mull over the holidays
    • Chase expands giving campaign in 2020
      McDivitt will showcase Ascend's COVID-19 work on CNBC's Mad Money
      Move over, Plastic Man: Here comes Plastic Woman
      Star in spotlight with West Virginia philanthropy award
    • The business case for producer responsibility
      Think divided government stalls plastics legislation? Think again
      ACC, NAM eye economic priorities in Biden presidency
      As scrap exports drop, will plastics recycling rate fall?
    • Just how big is thermoforming in North America?
      Changing names for compounders embracing corporate branding
      Diversity the key to outperforming the market
      A timeline of the industry's COVID response
    • Watching, and hoping, for progress in 2021
      The business case for producer responsibility
      Compounders write a business survival story in 2020
      Think divided government stalls plastics legislation? Think again
    • Plastics industry business owners: Listen to your future workforce
      Perspective: ‘Fake news' of a different sort?
      Perspective: Making products in the USA is good for the planet
      Perspective: Reflections on a decade of global industry collaboration on marine litter
    • Modernizing recycling infrastructure will benefit businesses as well as the environment
      Mailbag: Oil-plastics connection is overstated
      Mailbag: Plastics recycling not cost-effective
      Mailbag: Price increases hurting North American PE buyers
  • Shop Floor
    • Blending
    • Compounding
    • Drying
    • Injection Molding
    • Purging
    • Robotics
    • Size Reduction
    • Structural Foam
    • Tooling
    • Training
    • Maintenance can ensure efficient blender operation
      Dosing: Perfect for adding color
      Blending vs dosing: What you need to know
      Going low or high: Comparing volume
    • Colors and custom compounds
      In the laboratory: Compounding solutions
      Recycling content: Resins going ‘green’
      Compounding: Glass and other fillers
    • Dryer maintenance: Don’t err with air
      Dryers: Options for a shop’s process
      Dryer installation: Going central?
      Resins: Hygroscopic or non-hygroscopic
    • Electric injection molding presses: Efficiency is key
      Hydraulic injection molding machines
      Proper maintenance can prevent downtime
      Hybrid injection molding machines
    • Purging Hot runners: Open or closed methods
      Purging extrusion machinery
      Purging extrusion blow molding machines
      Purging: Chemical, abrasive and non-abrasive
    • Controls, special applications boost production, profitability
      Robot maintenance key for smooth operation
      High-speed robots: A rapid way to increase efficiency
      Robots: Every shape and size
    • Maintenance: Key for efficiency
      Shredders: Plastic in pieces
      Safety first for size reduction
      Granulators: The right fit
    • Structural foam molding: Flexibility for processors
      Video: Structural foam molding
    • Mold inventory: How many molds does a shop have?
      Molds: Innovation
      Mold changeover: Saving time and money
      How molds work
    • Labor: Apprenticeships may provide answer
      College training, programs
      Internships: Solving the skills gap in-house
      Lean Six Sigma: Transforming business operation
  • Events
    • Plastics News Events
    • Industry Events
    • Livestreams/Webinars
    • Ask the Expert
    • Polymer Points Live
    • Reifenhäuser Technologies Livestreams
    • 2020 Caps & Closures Library
    • Plastics in Healthcare Library
    • Women Breaking the Mold Networking Forum Library
    • Polymer Points Live - February 2021
      Polymer Points Live - January 2021
      Polymer Points Live - December 2020
      Polymer Points Live - October 2020
    • Plastics in Healthcare 2020
    • Plastics News Executive Forum
    • Plastics in Automotive
    • Plastics News Caps & Closures
    • Plastics in Healthcare
    • Women Breaking the Mold Networking Forum
  • Resin Prices
    • All Resins
    • Commodity TPs
    • High Temp TPs
    • ETPs
    • Thermosets
    • Recycled Plastics
    • Historic Commodity Thermoplastics
    • Historic High Temp Thermoplastics
    • Historic Engineering Thermoplastics
    • Historic Thermosets
    • Historic Recycled Plastics
  • Rankings
    • Injection Molders
    • Blow Molders
    • Film Sheet
    • Thermoformers
    • Pipe Profile Tubing
    • Rotomolders
    • Mold/Toolmakers
    • LSR Processors
    • Recyclers
    • Compounders - List
    • Association - List
    • Plastic Lumber - List
    • All
  • Data Store
  • Directory
  • More+
    • Classifieds
    • Digital Edition
    • Newsletters
    • Sponsored Content
    • Processor of the Year submissions
    • White Papers
    • Sponsored By Mitsubishi
      Innovative new technology from Mitsubishi Engineering-Plastics Corporation helps reduce emission footprints
      Canon Virginia, Inc.
      Sponsored Content By Canon Virginia, Inc.
      Canon Virginia Inc. brings collaboration to the table
      Sponsored By CDS MACHINES
      Facing medical equipment shortages during COVID-19 outbreak?
      Sponsored Content By Canon Virginia, Inc.
      Transform your molding capabilities with the Canon Shuttle Mold System
    • Sponsored By Conexiom
      Use Sales Order Automation to free up time for CSRs to focus on customers, not manual entry
    • Place an Ad
    • Sign up for Early Classified
MENU
Breadcrumb
  1. Home
  2. News
July 21, 2008 02:00 AM

China still competitive venue, not cheapest

Steve Toloken
  • Tweet
  • Share
  • Share
  • Email
  • More
    Print

    Like many Chinese manufacturers, injection molder VS International Group Ltd. is feeling the pinch from rising costs and a stronger Chinese yuan, and seeing customers shift work to other cheaper manufacturing locations.

    The electronics and appliances molder in Hong Kong said sales fell 8 percent and profit dropped 40 percent in the six months ended Jan. 31, ``largely due'' to business leaving its Chinese plants for cheaper countries.

    ``It's definitely challenging,'' said VS spokesman TK Chang.

    Scenarios like VS International's are prompting a debate: Has China lost its appeal as the world's low-cost workshop?

    The challenges are severe.

    One industry estimate said about 20,000 of the 65,000 Hong Kong-owned factories in South China's Pearl River Delta manufacturing zone could close, according to an article in Hong Kong's South China Morning Post newspaper. And last month China saw its slowest growth in manufacturing in almost three years, as inflation, higher labor costs and weakness in some export markets took their toll.

    But a look at some of the largest plastics companies' public financial filings and interviews with industry officials shine a different light. Those sources suggest many firms and sectors are adjusting and maintaining their growth.

    In fact, factors like a well-developed infrastructure may keep China's place as a manufacturing center. And firms with resources to invest in technology, or that are focused on growing sectors such as automotive or telecommunications, are faring much better than those in lower-end markets like toys.

    Contending globally

    Ningbo Haitian Group Ltd., China's largest injection molding machinery maker, said its exports rose 31 percent last year. A senior executive said so far rising costs in China have not hurt the firm's export business. Overall sales and profit rose more than 20 percent.

    Helmar Franz, executive vice president, said the situation is complex, with some of Ningbo, China-based Haitian's customers greatly affected by the rising costs.

    Franz said he does see China losing some of its competitiveness to places like Thailand. Chinese companies contend not only with global challenges, like rising plastic costs, but also with several unique challenges to China, such as new tax and labor laws, and measures designed to stop the economy from overheating.

    But Franz said the impact should not be overstated.

    ``I don't think Chinese competitiveness in the international market is much affected,'' he said. ``There are some extraordinary impacts on the Chinese industry from the government trying to cool down the economy. Everyone is facing those issues, and some industries can absorb it and some cannot.''

    VS International, which saw its injection molding sales fall 17 percent, to HK$501.4 million (US$64 million), said China retains advantages against its Asian neighbors, even with rising costs.

    ``I don't think China is losing competitiveness generally,'' said Chang, who is VS group financial controller for Johor, Malaysia-based affiliate VS Industry Bhd.

    ``Costs are rising, yes, that's a fact, but the support industries are there,'' he said.

    China has support industries that rivals may lack, such as a well-developed domestic machinery business, he said. It also has infrastructure, a sizable domestic market and more political stability than some neighbors, he added.

    ``In terms of cost, China does not really enjoy much benefit compared to Malaysia, Thailand, Indonesia and Vietnam,'' Chang said. ``The strengths of China are political stability and infrastructure and market.''

    Countries touted as rivals, such as Vietnam, have been experiencing their own economic problems during the past six months, he said. And China's tax system is much clearer than Indonesia's, for example, according to Chang.

    VS Industry set up a molding plant in Vietnam, and is seeing growth in that country from the movement away from China, the company said. Parent VS International employs about 15,000 in factories in China, Indonesia, Malaysia and Vietnam.

    Chang said any decision about where to locate must weigh many factors beyond cost. Some manufacturing that left Malaysia 10 years ago came back, just as some plants leaving China for Vietnam may return in time, he said.

    Changes in China

    One auto industry analyst in Thailand said he is noticing renewed interest in Southeast Asia.

    ``We're starting to see, by no means a flood, but a trickling of interest in Southeast Asia that is a reaction to what's happening in China,'' said John Bonnell, an analyst in Bangkok, Thailand, for Automotive Resources Asia Ltd. ``Thailand and Southeast Asia sort of lost the attention of the auto industry when China took off.''

    The Chinese auto industry continues to grow, though. Chinese auto parts maker Minth Group Ltd. reported that, even amid rising costs in China, its sales rose 47 percent last year, to 1.4 billion yuan (US$205 million), and profit rose 33 percent.

    Ningbo-based Minth said it boosted spending on research and development 54 percent, and expanded globally, buying a plastic trim plant in the United States and establishing a metal and plastic joint venture in Thailand.

    The conditions in China have worked to the advantage of Minth and other large firms, weeding out smaller companies, it said.

    ``The increase in labor cost, fluctuation in raw material price, and the expedited pace of new automobile model launches ... together with other facts raised the entry barrier of the industry of auto parts manufacture,'' Minth wrote in its 2007 annual report. ``The [original equipment manufacturers] have represented their intention to purchase from suppliers with decent scale, concurrent design capabilities as well as high-standard quality and cost-control capabilities.''

    One plastic industry analyst said it's the lower-end firms that have been particularly hard-hit.

    ``The low-value-added converters, like the toy makers and makers of shopping bags, they are hurting the most,'' said Bingli Wang, polyolefins director in the Shanghai office of Chemical Market Associates Inc. of Houston. ``Their costs rise very much, so many converters are in the red now.''

    Hong Kong-based toy maker and injection molder Kader Holdings Co. Ltd. reported that its investments in better production methods resulted in greater profits in 2007, even as the toy industry faced product recalls and serious problems from rising costs in China.

    ``An improvement in sales together with higher production efficiency enabled the group to overcome these hurdles and improve overall net profit and profit margins in 2007,'' Kader said. ``The group will continue to develop higher-value-added products, further integrate technology with toys and modernize and scrutinize production methods.''

    Injection press and equipment maker Cosmos Machinery Enterprises Ltd. of Hong Kong reported that sales increased modestly, about 3 percent, in its machinery business last year, amid the tough conditions. And a Cosmos official said the company is seeing similar results this year.

    Cosmos said the strengthening yuan, rising plastic costs and China's reduction in its tax rebates for exports of plastic products made the industry much more conservative in buying machines and did cause significant pain in lower-end markets, where Cosmos sells its commodity-oriented general-purpose injection molding machines.

    But the company said it has invested in new technology in recent years, such as developing its ``green line'' energy-efficient servo injection molding machines, foam injection molding presses and direct compound molding machines.

    Sectors such as automotive, household appliances and telecommunications are showing satisfactory growth, while more price-sensitive markets like toys and daily-use products are much harder hit, said Simon Ho, director of Cosmos' marketing and international trade departments.

    ``We can see that China will still be the factory of the world,'' Ho said. ``Compared with other cheap places, China still has the political stability, infrastructure and logistics.

    ``The Chinese plastics industry will up shift to a higher level and remain competitive.''

    Letter
    to the
    Editor

    Do you have an opinion about this story? Do you have some thoughts you'd like to share with our readers? Plastics News would love to hear from you. Email your letter to Editor at [email protected]

    Get our newsletters

    Staying current is easy with Plastics News delivered straight to your inbox, free of charge.

    Subscribe today

    Subscribe to Plastics News

    Subscribe now
    Connect with Us
    • LinkedIn
    • Facebook
    • Twitter
    • Instagram

    Plastics News covers the business of the global plastics industry. We report news, gather data and deliver timely information that provides our readers with a competitive advantage.

    logo-pn-color
    Contact Us

    1155 Gratiot Avenue
    Detroit MI 48207-2997

    Customer Service:
    877-320-1723

    Resources
    • About
    • Staff
    • Editorial Calendar
    • Media Kit
    • Data Store
    • Digital Edition
    • Custom Content
    • People
    • Contact
    • Careers
    • Sitemap
    Related Crain Publications
    • Sustainable Plastics
    • Rubber & Plastics News
    • Urethanes Technology
    • Plastics News China
    • European Rubber Journal
    • Tire Business
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • News
      • Processor News
        • Injection Molding
        • Blow Molding
        • Film & Sheet
        • Pipe/Profile/Tubing
        • Rotomolding
        • Thermoforming
        • Recycling
      • Suppliers
        • Machinery
        • Materials
        • Molds/Tooling
        • Product news
        • Design
      • More News
        • What Keeps You Up At Night
        • Mergers & Acquisitions
        • Sustainability
        • Public Policy
        • Material Insights Videos
        • Numbers that Matter
        • Polymer Points Live
      • End Markets
        • Automotive
        • Packaging
        • Medical
        • Consumer Products
        • Construction
      • FYI Charts
        • Current FYI
      • LSR World
      • Multimedia
        • Videos
        • Galleries
        • Podcasts
      • NPE2021
      • K Show
      • ENGEL Sponsored Content
      • Special Reports
        • CEO Issue
        • Best Places to Work
        • Processor of the Year
        • Rising Stars
        • Women Breaking the Mold
    • Opinion
      • The Plastics Blog
      • Kickstart
      • Heavy Metal
      • One Good Resin
      • BRICS and Plastics
      • All Things Data
      • Viewpoint
      • Perspective
      • Mailbag
    • Shop Floor
      • Blending
      • Compounding
      • Drying
      • Injection Molding
      • Purging
      • Robotics
      • Size Reduction
      • Structural Foam
      • Tooling
      • Training
    • Events
      • Plastics News Events
        • Plastics News Executive Forum
        • Plastics in Automotive
        • Plastics News Caps & Closures
        • Plastics in Healthcare
        • Women Breaking the Mold Networking Forum
      • Industry Events
      • Livestreams/Webinars
      • Ask the Expert
      • Polymer Points Live
      • Reifenhäuser Technologies Livestreams
      • 2020 Caps & Closures Library
      • Plastics in Healthcare Library
      • Women Breaking the Mold Networking Forum Library
    • Resin Prices
      • All Resins
      • Commodity TPs
        • Historic Commodity Thermoplastics
      • High Temp TPs
        • Historic High Temp Thermoplastics
      • ETPs
        • Historic Engineering Thermoplastics
      • Thermosets
        • Historic Thermosets
      • Recycled Plastics
        • Historic Recycled Plastics
    • Rankings
      • Injection Molders
      • Blow Molders
      • Film Sheet
      • Thermoformers
      • Pipe Profile Tubing
      • Rotomolders
      • Mold/Toolmakers
      • LSR Processors
      • Recyclers
      • Compounders - List
      • Association - List
      • Plastic Lumber - List
      • All
    • Data Store
    • Directory
    • More+
      • Classifieds
        • Place an Ad
        • Sign up for Early Classified
      • Digital Edition
      • Newsletters
      • Sponsored Content
      • Processor of the Year submissions
      • White Papers