Just a few years ago, China was mainly a cheap export base, where products were made and sent elsewhere around the world. These days, the reverse is increasingly true: China's growing domestic market is attracting more attention, particularly from global resin makers.
Part of that change is because China's government has launched massive stimulus spending programs to shore up its economy with new infrastructure, expanded health care and tax breaks for purchasing cars and electronics, so firms are busy scouting for their piece of that pie.
Couple that setting with a massive falloff in Chinese exports 23 percent in April as the world economy continued sputtering and it's easy to see why executives at the Chinaplas trade show, held May 18-21 in Guangzhou, said they are focusing more on China's domestic market.
Wilmington, Del.-based DuPont Co.'s engineering polymers unit, for example, predicts 50 percent of its business in China this year could go into the domestic market, compared with one-third last year.
At Ticona Engineering Polymers, which has invested in Chinese manufacturing in recent years, officials believe tougher automotive standards in fuel economy and safety will drive up engineering polymers' use in China in coming years, from less than 2 pounds per car today to closer to the 7-8 pounds per vehicle common in developed economies.
Of course, China's domestic market can't come close to making up what's been lost globally. Even with economic growth of 6-8 percent this year, China's per capita polymer consumption remains low less than one-third of consumption in the U.S.
And, perhaps more importantly, it's not clear how solid China's economic recovery is.
Almost every industry executive interviewed at Chinaplas said it's too soon to say if the recovery being seen in China right now is something solid and sustainable, or is a bubble based on restocking or the government stimulus.
We seem to have seen a pickup in demand in China in the first quarter this year, [but] it's hard to understand exactly what is driving that, said John Verity, vice president of polyolefins for ExxonMobil Chemical Co. of Houston. We want to see, obviously, as we go through the next quarter whether it's sustainable or not.
For China to really boost domestic consumption, the country will need to improve public health care, education and housing so people do not feel a need to save so much money, said Stanley Chu, chairman of Hong Kong-based Adsale Exhibition Services Inc., which organizes Chinaplas.
Still, there are significant changes under way in China's domestic market, some executives said.
There is real demand in the domestic China market, said Hong Kong-based Philippe Hanck of DuPont's engineering polymers unit.
The quality level of the domestic market is changing. Whereas before they used to put ABS or [polypropylene] in appliances or electronics, now they will use nylon materials, said Hanck, who directs sales and marketing in Greater China, Southeast Asia and India.
He said DuPont has seen a tangible effect from China's government stimulus spending in automotive, rail, mobile phones and renewable energy.
DuPont's industrial polymers and packaging unit is seeing significant demand for its plastics in photovoltaic power applications, which are tied into the government stimulus packages of several Asian countries, including China, said Pascal Rechatin, Asia- Pacific managing director for DuPont's industrial polymers and packaging unit.
We are very bullish on solar, said Rechatin, who is based in Shanghai. This one feels like being at the beginning of the automotive industry for plastics.
In the automotive market, for example, China surpassed the U.S. early this year in the number of units sold on a monthly basis, and is expected to continue to nearly double to about 16 million cars a year by 2014, said Roland Polet, general manager of Ticona Engineering Polymers of Florence, Ky., citing industry studies.
We see this growth trend in China in auto builds and we also see this huge drive to upgrade automotive standards in China, up close to Western standards, he said. That all requires lighter parts and more sophisticated parts.
Polet compared China's situation with that of India, where Ticona is supplying materials for the fuel systems of the Nano, an ultrabudget, $2,500 car made by India's Tata Motors.
Even with that low price tag, car designers still choose engineering polymers because they need them for fire safety and other standards, he said.
It's not so much driven by the price of the car but by the regulations, Polet said.
It's the same with Chinese domestic carmakers like Chery Automobile Co., who realize they need to upgrade materials if they want to enter world markets, he said.
Ticona expects China to be 25 percent of its business by 2014, up from about 10 percent now, he said.
Polyolefins maker LyondellBasell Industries AF SCA also expects the auto market in China to grow this year.
Frank Noeltgen, vice president of automotive in Asia Pacific for LyondellBasell, said that at the beginning of the year, people were very cautious but are now projecting 5-8 percent growth in the automotive market in China in 2009.
China is an anomaly in Asia, however, as other markets therremain down, he said: China is the only example worldwide [in the auto market], I would say, where the dip has been only a dip and not a crisis.