Investment always follows market growth opportunities.
Even though Kingfa Science and Technology Co. Ltd., China's largest plastics compounder, has so far been mostly a domestic player, it's eagerly looking for growth opportunities outside the saturated and cooling market in China.
To put things in the right perspective, for many years, Kingfa has been busy building capacity in China to meet surging demand created by China's urbanization and auto boom. It didn't need to put much weight on overseas market development.
But the tide has turned.
In the first half of 2015, Kingfa's domestic sales only grew 1.74 percent, a fraction of an otherwise modest export growth rate of 5.25 percent. Prior to this year, domestic growth has mostly outpaced export growth, with the ratio at 12.34 percent/3.55 percent in 2014, 19.09 percent/6.16 percent in 2013, and 5.74 percent/6.09 percent in 2012.
In this context, it's not surprising at all to see Kingfa sending a signal on possible investment in the U.S., one of the few bright spots in the global economy with a robust automotive industry.
A Kingfa executive has told state media China News Service that the company is considering building capacity in the U.S. and other places, according to a CNS report earlier this week.
The company sees the benefits of being closer to the target market but also emphasizes another goal — attracting more global talent.
The company said it lacks resources compared to state owned conglomerates, especially in terms of talent. It hopes to change that with the establishment of overseas production site(s).
The Guangzhou-based company established a wholly owned subsidiary in the United States in February, in Ann Arbor, Mich., hoping to improve its service to global clients and grab some market share in the booming U.S. automotive market.
The firm, Kingfa Science & Technology (USA) Inc. was incorporated on Feb. 3 with 1,000 shares, records at Michigan's Department of Licensing and Regulatory Affairs show. The company has a registered office address in Ann Arbor, with local lawyer Mark Heusel as the resident agent.
Kingfa's smaller competitor Shanghai Pret Composites Co. Ltd. earlier this year became the first company in the Chinese compounding industry to establish substantial presence in the U.S, by acquiring Wellman Plastics Recycling LLC, which supplies recycled engineering plastics to the auto industry.