NINGBO, CHINA (Jan. 4, 1:20 p.m. ET) — Chinese injection press maker Haitian International Holdings Ltd. has canceled plans for a factory in the northern Chinese city of Dalian, saying the Chinese government's austerity measures have slowed down the market.
Haitian had announced in 2010 that it planned to build the factory in Dalian, Liaoning province, to focus on selling into northern China.
But it told the Hong Kong Stock Exchange that Chinese government policies to slow the fast-growing economy are forcing it to scale back there, and focus instead on other investments at its Ningbo, Zhejiang province, headquarters.
Dalian would have been Haitian's first factory in northern China.
Haitian Executive Director Helmar Franz said the Chinese market has slowed, echoing reports of softness in the domestic injection molding sector from other large plastic machinery makers like Chen Hsong Holdings Ltd.
“We see the Chinese local market still at a high level, although growth in 2011 has [been] reduced significantly,” he said in a Jan. 4 email. “Association figures are not available yet to make a reliable conclusion. However, this slowdown in my personal opinion… is temporary.”
He said the company wants to put attention on replacing imported machines in China.
“There is still a huge potential for us to explore, and this relates mainly to electric machines and big machines,” he said. “We see good potential for us in China even though the total market does not show much growth at this time.”
He declined to provide sales figures, saying they would have to come with the company's annual earnings report, which is typically released in March.
Franz also said the company could revisit a north China investment: “Developing the north in China is still on the agenda, and we may come back to it later.”
Haitian opened a new factory in Ningbo's Export Processing Zone in April, and the company said that plant has given it sufficient capacity for exports. Dalian would have been “inefficient” for those markets, it said.
“The management considers it would be more beneficial to the group to dispose Dalian Guo Hua [the investment holding company used to buy land in Dalian] and focus on those particular growth drivers of the group's business, utilizing synergies in Ningbo,” Haitian said in an Oct. 21 stock exchange filing.
Haitian sold the land it was to use for the factory in Dalian to a related company, Ningbo Haitian Precision Machinery Co. Ltd., which makes computer numerically-controlled machining centers.
Haitian's Plastics Machinery unit and an investment company, Guo Hua Enterprises Group Ltd., which is itself an indirect wholly-owned subsidiary of Haitian International, had bought the Dalian land in 2009.
Guo Hua owned 75 percent of the Dalian Guo Hua subsidiary, with Haitian Plastics Machinery owning the other 25 percent.
Haitian Precision paid 107.8 million yuan ($17.13 million) for the land. Haitian said in the stock filing it would record a profit of about $13 million yuan ($2.06 million) on the sale.
Haitian Precision is owned by Haitian and a second company, Anson Asia (Hong Kong) Ltd., which includes several top Haitian executives among its majority investors.