With steadily rising costs becoming the reality for Chinese plastics processors, some are making changes to cope, such as adopting more automation, investing in training and seeking out better markets.
Injection molder Shandong Aode Medical Device Co. Ltd., whose factory is outside the traditional export zones around Guangdong and Shanghai, said wages in its region of Shandong province are rising at a similar pace as in Guangdong — up 50 percent in the last three years, from $191 a month to $287.
That and the strengthening yuan against the U.S. dollar have posed real challenges to Aode's international competitiveness, said Eric Feng, import and export manager for the Guhe, China-based company, in an interview at Canton Fair, held in April and May in Guangzhou.
But the company, which makes medical disposables like syringes and derives 60 percent of its sales from exports, said the difficulties are proving manageable.
“We are trying to reduce our costs, improve management and train workers to be more productive,” said Feng. “We can manage. We are staying competitive, but really the market is tough.”
In fact, the firm is expanding, building a new injection molding and assembly factory in Shandong that gives it room to triple production. It is expanding its workforce from 600 now to 1,500 by the end of the year, when the facility will be finished, he said.
One of the goals of the new factory will be to target China's growing domestic medical market. And it also hopes the larger capacity will give it economies of scale to cut costs, Feng said.
Business appeared flat at the mammoth fair, which draws in about 200,000 buyers from more than 200 countries to negotiate with thousands of exhibiting Chinese companies. The fair takes place twice a year.
The state-run China Daily, for example, reported that transactions in the first week of the three-week show in April were up only 1.1 percent from the previous session in October, which the paper said signaled weaker export markets.
There was some evidence among Chinese firms at the fair, which ran from mid-April to early May, that attention was shifting to emerging markets.
The China Chamber of Commerce for Import and Export of Machinery and Electronic Products reported, for example, that exports for its products at the fair dropped to the U.S. and Europe, its traditional markets, but rose to newer markets like Southeast Asia and South and Central America.
Some plastics processors were reporting more interest in Africa.
“These years, Africa is rising very fast,” said Kyle Van, sales manager with Jiangxi Hongda Medical Equipment Group in Jinxian. “It is a new market. Two years ago I did not have any customers from Africa.”
Hongda, with more than 5,000 employees, said it is one of China's largest makers of medical disposables, including infusion sets, syringes and blood collection devices.
Another medical injection molder, Wuxi Yushou Medical Appliances Co. Ltd., said its Africa business is also up substantially, as the company can fill a market niche for quality products that are not too costly.
There's less competition in Africa than in a market like Europe, and the Chinese firm might need to make substantial additional investments to boost its business in Europe, according to Fiona Dai, a worker in the company's international trade department.
One molder of office products, Cosimex (HK) Ltd., is finding customers open to sharing some of the cost increases, according to Celine Chan, senior merchandiser for the Hong Kong-based plastic and metal office products supplier.
“The customer suffers some, but we also need to suffer some” as prices rise, said Chan, whose company has a factory in Jiaxing. “We will also focus on automation but it requires a lot of investment. It will be step by step.”
China's cost advantage is less than it was, but moving production to a cheaper location means training new workers and building supply chains, so buyers are open to some increases, she said.
“The cost advantage is not like it was before, but we still have some advantage,” she said.
Even with the adjustments companies are making, some are reporting difficult conditions, particularly in industries like toys, where there may be less reliance on technology.
“It is very tough to do business these years,” said Jean Xu, an account manager with Nantong Jiahe Plastic Toys Co. Ltd. in Haimen. The firm focuses on exports to the U.S., Europe and Japan, and has tried to develop new products and designs, Xu said.
“There is basically no profit,” she said. “If you increase the prices, the old customers will not accept.”