For plastics manufacturers around the globe, the financial crisis continues to cast a long shadow. Export markets are down globally; the purchase of consumer goods and construction has slowed.
At Chinaplas 2009, however, many companies were starting to see a silver lining in the domestic market growing brighter alongside the developing country's automotive market.
In the past few months, car purchases in China have exploded, driven by tax rebates and subsidies provided by the government.
This is the first indication that the subsidies the Chinese government is paying are having an impact, said Rainer Rettig with Bayer MaterialScience AG of Leverkusen, Germany. The automotive industry was the first, said the senior vice president of polycarbonates and advanced resins division for Asia Pacific.
Sales of China's domestically made vehicles started to climb after the government released a set of tax breaks and subsidies on small-engine vehicles, with additional incentives aimed at rural areas. Sales taxes on cars with engines smaller than 1.6 liters were reduced by half by the end of last year. In rural areas, an old-for-new swapping program was adopted, offering subsidies totaling 5 billion yuan ($730 million) to replace old three-wheeled vehicles or trucks with new, small-engine cars.
After the incentives took effect, Chinese auto sales surpassed U.S. auto sales for the first time. In April, according to the China Association of Automobile Manufacturers, 1.15 million units were sold domestically. The upswing caused carmakers like General Motors Corp. and Volkswagen AG to revise their 2009 forecasts upward. And the upward trend is being felt throughout China's plastics industry.
We were actually quite surprised, said Juergen Heise, general manager at Clariant Chemicals (China) Ltd. You focus on the U.S. and Europe, and there all you see is car companies going bankrupt.
Heise said the boost is much appreciated by many companies operating in China.
In Asia, this is really the first time we've seen a crisis impact China, he said. During the Asian financial crisis there was really no impact, but this time around you could see and feel the crisis in China.
Some companies are taking the increase in car sales as their cue to refocus on the auto industry. FranÃ§ois Hinker, vice president of Rhodia Polyamide's engineering plastics business, said one of the Lyon, France-based firm's main priorities now is to support local carmakers and molders in China.
For those firms pinning their hopes on the auto industry, sales likely will continue climbing. China's government recently expanded its rural subsidy program to select cities, including Beijing, Shanghai, Tianjin and several provinces along China's coast.
The question is really how quickly people have access to money, Heise said. And the Chinese government has a lot of money to spend.