• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content

Loading…

Flash Player 9 (or above) is needed to view presentations.
We have detected that you do not have it on your computer. To install it, go here.

Like this document? Why not share!

China Packaging Industry Report 2006

on

  • 4,242 views

This report was written in early 2006 and hence relied heavily on data compiled in 2004-5. For this reason, CIO are currently working with the China Packaging Technology Association to compile a fully ...

This report was written in early 2006 and hence relied heavily on data compiled in 2004-5. For this reason, CIO are currently working with the China Packaging Technology Association to compile a fully updated and revised edition due for publication at years’ end.

For more information on updates to this report, please contact:

info@chinaintelligenceonline.com

Statistics

Views

Total Views
4,242
Views on SlideShare
4,218
Embed Views
24

Actions

Likes
4
Downloads
0
Comments
0

5 Embeds 24

http://www.chinaintelligenceonline.com 15
http://www.lmodules.com 5
http://www.linkedin.com 2
http://www.slideshare.net 1
http://chinaintelligenceonline.com 1

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    China Packaging Industry Report 2006 China Packaging Industry Report 2006 Document Transcript

    • 中国包装行业 2006 China Packaging Industry Overview 2006 An industry analysis report from China Intelligence Online. Informing business in China.
    • China Intelligence Online www.chinaintelligenceonline.com 1 Table of Contents 1 TABLE OF CONTENTS ......................................................................................................................... 2 2 CHINA INTELLIGENCE ONLINE ............................................................................................................ 3 3 FOREWORD TO THE CHINA PACKAGING INDUSTRY REPORT ............................................................... 4 4 INDUSTRY SNAPSHOT ....................................................................................................................... 5 5 THE GEOGRAPHY OF CHINA’S ECONOMIC ENVIRONMENT.................................................................. 6 5.1 PEARL RIVER DELTA (PRD) ...................................................................................................................... 6 5.2 YANGTZE RIVER DELTA (YRD) .................................................................................................................. 7 5.3 BOHAI BAY .......................................................................................................................................... 8 5.4 WESTERN CHINA .................................................................................................................................. 8 6 CHINA PACKAGING INDUSTRY ......................................................................................................... 10 6.1 INDUSTRY OVERVIEW ........................................................................................................................... 10 6.2 GROWTH TRENDS AND INDUSTRY FORECASTS ............................................................................................. 12 6.3 PAPER PACKAGING INDUSTRY ................................................................................................................. 18 6.3.1 PAPER PACKAGING ...................................................................................................................................... 18 6.3.2 INDUSTRY DEVELOPMENT ............................................................................................................................. 18 6.3.3 CHEMICALS IN THE CHINESE PAPER INDUSTRY 2005.......................................................................................... 20 6.3.4 PAPER PACKAGING PRODUCTS ....................................................................................................................... 20 6.3.5 PAPER AND THE PAPER PRODUCT IMPORT MARKET ........................................................................................... 21 6.3.6 FOOD PROCESSING & PACKAGING (P&P) ........................................................................................................ 21 6.4 PLASTIC PACKAGING INDUSTRY ............................................................................................................... 22 6.4.1 INDUSTRY TRENDS ....................................................................................................................................... 23 6.4.2 INDUSTRY NEEDS ......................................................................................................................................... 27 6.4.3 PACKAGING PRINTING .................................................................................................................................. 28 6.4.4 PACKAGING PRINTING MACHINERY INDUSTRY................................................................................................... 28 6.4.5 DIGITAL PRINTING ....................................................................................................................................... 29 6.4.6 INK ........................................................................................................................................................... 29 6.4.7 METAL PACKAGING ..................................................................................................................................... 29 6.4.8 GLASS PACKAGING ...................................................................................................................................... 30 6.4.9 FUTURE DEVELOPMENTS .............................................................................................................................. 31 6.5 PACKAGING MACHINERY ....................................................................................................................... 32 6.5.1 INDUSTRY OVERVIEW ................................................................................................................................... 32 6.5.2 COMPETITOR ANALYSIS ................................................................................................................................ 33 6.5.3 OPPORTUNITIES FOR INTERNATIONAL FIRMS .................................................................................................... 36 6.6 END-USER ANALYSIS ............................................................................................................................ 39 6.6.1 RURAL FIRMS & TOWNSHIP ENTERPRISES ........................................................................................................ 39 6.7 FOOD............................................................................................................................................... 42 6.8 INDUSTRIAL PACKAGING ZONES............................................................................................................... 43 6.9 LOCAL SOURCING ................................................................................................................................ 43 7 DISCLAIMER ................................................................................................................................... 44 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 2
    • China Intelligence Online www.chinaintelligenceonline.com 2 China Intelligence Online China Intelligence Online gathers business intelligence and provides analysis as well as general business services for international organisations working or interested in the Greater China and East Asia markets. Business services include company establishment, customised research, sales and marketing, and client representation. Our researchers and analysts collectively have decades of experience on the ground in Mainland China, both living and working; not just in the developed east, but throughout the vast hinterland that represents the real opportunities in the coming decades. In addition, all our researches and analysts, Western and Chinese, are fluent and literate in both Mandarin Chinese and English. China Intelligence Online can help you understand the most dynamic and challenging market in the world. Provide strategic as well as on the ground practical assistance in entering the market, either through translation, relationship building, company incorporation, market research or sales and marketing. Previous clients have included the Terminal Options Conference (TOC), Transport Intelligence, Airline Cargo Management, Informa publications such as Cargo Systems and International Freighting Weekly, China Federation of Logistics and Purchasing (CFLP) and China Ports and Harbours Association, among others. For more information contact: info@chinaintelligenceonline.com Or visit our online business intelligence portal: www.chinaintelligenceonline.com 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 3
    • China Intelligence Online www.chinaintelligenceonline.com 3 Foreword to the China Packaging Industry Report This report was written in early 2006 and hence relied heavily on data compiled in 2004-5. For this reason, CIO are currently working with the China Packaging Technology Association to compile a fully updated and revised edition due for publication at years’ end. For such a large and growing industry, reliable information about packaging in China has remained relatively elusive, prompting the need for a thorough overview. In the past thirty years since economic reforms took hold, a mass consumer society has developed in China, leading to an explosion in sales for items ranging from instant noodles to DVDs. Economic growth has brought changing lifestyles to China, as hundreds of millions of people have escaped poverty and entered the burgeoning middle class. Correspondingly, products catering to busier lifestyles, such as processed food, have become increasingly valuable. In the years since this report was written, a major global economic crisis threw a wrench into all sectors of the Chinese economy, including the packaging industry. As painful as the crisis has been for many global economic players, the long-term outlook for packaging in China remains brisk. Inefficiencies and inadequacies continue to plague domestic firms in the Chinese market, indicating enormous opportunities for international companies. China Intelligence Online’s Packaging Industry Report has the detailed information international players need to understand one of China’s most significant markets. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 4
    • China Intelligence Online www.chinaintelligenceonline.com 4 Industry Snapshot When the China Packaging Technology Association (CPTA) was formed in 1980, total packaging output in the country totalled only CNY 7.2bn. That year marked just the third year of the economic reform era in China, an era marked by astonishing growth in all sectors of the economy. Packaging is no exception; by 2005, total output value has grown to a robust USD 39.5bn, a number projected to increase to USD 55.5bn by 2010 and USD 74bn by 2015. Surging demand for packaging materials within China has helped fuel development in the industry itself. At present, more than 20,000 firms employing well over 3m workers operate within the packaging industry, a market size that has caused many analysts to compare China to South Korea and Taiwan ten years ago. Suppliers within China purchase most basic equipment from domestic sources whilst most rely on foreign imports for more advanced equipment. This trend indicates that the Chinese market, while developing rapidly, still has ample room for maturation. Traditionally, most packaging industry end-users have prioritised price over all else, though this trend appears to be changing. As lifestyles change, more consumers within China now consider quality, aesthetics, and even environmental protection when in purchasing packaging materials. Within the industry itself, plastic packaging is now experiencing the fastest growth, as more and more Chinese manufacturers substitute plastic for glass and metal packaging. At present, the plastic packaging industry grows at over 10 percent annually, as the industry—which grows from a low production base— matures. One trend to watch in coming years is the growing use of recyclable materials, as environmental consciousness continues to permeate the packaging industry in China. International firms with the capability to provide high-quality, environmentally-friendly materials may see their fortunes rise in the coming years. In any event, the future for the Chinese packaging industry as a whole is undeniably bright. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 5
    • China Intelligence Online www.chinaintelligenceonline.com 5 The Geography of China’s Economic Environment Like all other industries within China, the packaging industry operates under the peculiar structure of the Chinese economy, a structure different from similar-sized economies in the developed world. Rather than existing as one, large, integrated economy, the Chinese economy functions rather as an agglomeration of several distinct economic regions, each with closer ties to the outside world than to each other. Because these regions function in a similar way to individual countries with their own tariffs, regulations, and requirements, one consequence has been the absence of many large firms for an economy as large as China’s. The following is a brief description of the major regions comprising the Chinese economy: 5.1 Pearl River Delta (PRD) The PRD Economic Zone (PRDEC), which consists of Guangzhou, Shenzhen, Dongguan, Foshan, Zhongshan, Zhuhai, Jiangmen and parts of Huizhou and Zhaoqing, has since the start of the ‘Open Door’ policy been China’s most vibrant economic region. The region is now an important industrial market for all kinds of inputs, materials, and capital goods as well as a major market for transport and transport related services. Per capita income has been growing steadily over the past thirty years, hand in hand with consumer expenditures, making cities such as Shenzhen and Guangzhou among the most prosperous in the Chinese Mainland. The region’s proximity to Hong Kong, one of the primary catalysts for the region’s early development means its consumer tastes closely follow those of the west, creating attractive markets for foreign retailers. Although the PRDEC accounts for only 0.4 percent of China’s total land mass and less than 4 percent of the nation’s population, it accounts for more than 10 percent of the country’s GDP, and attracts almost 20 percent of all inbound FDI. At present Hong Kong companies employ more workers in the PRD region than the entire population of Hong Kong The Greater and Pan-PRD Economic cooperation zone At present Hong Kong companies employ more workers in the PRD region than the entire population of Hong Kong. With more and more businesses in the PRD straddling the three administrative regions of Guangdong, Hong Kong and Macau the government has established the Greater Pearl River Delta (GPRD) Economic Cooperation Zone. The role of which is to integrate Hong Kong and Macau into the wider Chinese 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 6
    • China Intelligence Online www.chinaintelligenceonline.com economy by streamlining investment regulation across the entire region and rationalising and integrating logistics development in the GPRD Area. Included in the zone are Hong Kong, Macau and nine Guangdong municipalities. The infrastructure projects spearheading integration include improved road infrastructures, the construction of the Guangzhou terminus of the national inter-modal rail network that will incorporate 18 full containerised rail hubs nationwide and increased air freight integration between Hong Kong and Guangzhou Baiyun Airport. At present Hong Kong is still China's biggest investment conduit. In an effort to stretch the benefits of that investment further into the southern China hinterland the government has also established the Pan-PRD Economic Zone. With economic growth and prosperity in the coastal regions far outstripping the west the government, and business, are keen to move production further inland. Increasingly as Shenzhen becomes a victim of its own success and land and wage rates rise, forcing the industrial hinterland further back into China makes sense. Integrating logistics infrastructure in the eight provinces surrounding the GPRD is hoped will encourage investment into the wider South China region as a whole. 5.2 Yangtze River Delta (YRD) Beginning in the early twentieth century, Shanghai has been a magnet for foreign finical interest for almost a century – an interregnum of a few decades of staunch Stalinist policies notwithstanding. This continued interest has largely been the driving force for the development of the region over the past three decades. In 1990s, the Chinese government opened the Pudong district of Shanghai to overseas investment, as well as additional cities along the Yangtze River valley. Since then, the Yangtze River delta has become one of China’s key economic regions. It consists mainly of 15 cities, including Shanghai, Nanjing, Suzhou, Zhenjiang and Wuxi, although its scope has recently been widened to include Taizhou City in Zhejiang Province. Yancheng, Huai'an and Ma'anshan cities in Jiangsu and Anhui provinces are also likely to join the economic grouping. The region is home to 10 percent of China’s population and it generates just over a fifth of China’s GDP and about a third of China’s foreign trade. Pudong enjoys many privileges not yet available to other zones. In addition to reduced duties and income tax, foreign financial institutions have also been allowed to set up in the region along with a stock exchange. It has therefore become the financial centre of China with 180 Chinese and foreign-funded financial institutions. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 7
    • China Intelligence Online www.chinaintelligenceonline.com The Chinese government has identified the development of a number of ‘pillar industries’: automotive (including components and spare parts), microelectronics and computers, household electrical appliances, pharmaceuticals, optical, mechanical, and electrical products. High GDP per capita rates within the region continue to ensure that the area remains a major point of interest for foreign manufacturers looking to capitalise on the increasingly affluent spending habits of China’s burgeoning middle classes. 5.3 Bohai Bay The Tianjin-Beijing Bohai triangle accounts for around nine percent of national GDP, with per capita incomes well above the national average. The primary driving force behind economic development in the area has been due to the twin poles of the two cities.: Beijing, the seat of political authority, and Tianjin, the capital’s gateway to the sea and hence the wider world. The region also includes some cities in Hebei, Shandong and Liaoning provinces, many of which are at different stages of development. Economic development in the triangle, in contrast to the PRD, and to a lesser extent the YRD, has in the past been restricted by an overall lack of coordination, which has to a large degree been the result of different administrative regions, each with separate responsibilities. This fragmentation in terms of administration has often meant that regions within the triangle often see themselves as in competition with neighbouring municipalities and counties. The third largest city in China, and the industrial capital of the northeast, Tianjin is one of China’s four municipalities directly under the control of the central government – the others being Shanghai, Chongqing and Beijing. Located 120km southwest of Beijing, the city is linked to the capital by high-speed train at a maximum speed of 350km per hour unveiled last year in time for the opening of the Beijing Olympics. The introduction of the service has effectively put the city in the commuter belt of the capital, and vice versa, greatly enhancing economic integration between the two. The shift of passengers from the conventional rail network has also freed the older network for utilisation as a freight route. 5.4 Western China The region known as Western China has long lagged behind the east in terms of economic development. Two major factors account for this discrepancy; China’s western provinces are far from the sea, a hindrance in such a historically export-dependent economy, and the region’s mountainous topography, making infrastructure development historically difficult. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 8
    • China Intelligence Online www.chinaintelligenceonline.com In the late 1990s, the Chinese government launched the ‘Go West’ strategy, a series of investment incentives intended to bring economic development to this once neglected region. Many major companies, attracted by talented worker pools and low labour costs, established operations in western China, bringing added attention to the region. Western China, in addition to being abundant in natural resources, also serves as the gateway to several of China’s most important international links. The provinces of Yunnan and Guangxi in the southwest have established firm economic ties with the nations of Southeast Asia, ties that also include more and better international transport links. Xinjiang and other regions in the northwest of China, meanwhile, are important due to their proximity to the energy-rich nations of Central Asia. Whilst Western China still cannot boast the same degree of wealth and development as the coastal region, its emergence in the past decade have made it a place both domestic and international market players have begun devoting significant attention. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 9
    • China Intelligence Online www.chinaintelligenceonline.com 6 China packaging industry 6.1 Industry overview Over the past few years China’s packaging industry has undergone a rapid transformation and all indicators seem to point to the fact that this rapid transformation is likely to continue apace. Fuelled by continuously growing consumption and higher living standards many companies engaged in the packaging industry, both domestic and foreign, packaging and packaging technology, have experienced rapid growth. In addition to linear growth, the China packaging industry is almost certainly the most dynamic in the world, with new growth areas emerging in almost every aspect of the market. The year the China Packaging Technology Association (CPTA) was formed, and shortly after the Deng Xiaoping ushered in the era of reform, 1980, China’s packaging industry output totaled little more than CNY 7bn. But with China’s continual march toward prosperity moving forward the industry was estimated to have reached USD 39.5bn in value by the end of 2005 and, should growth continue as forecast, USD 55.5bn by 2010; an average annual increase of 7 percent. By 2015 output value is expected to reach USD 74bn. At present, more than 20,000 packaging companies in China, employing well over three million employees across the country. In terms of technology, as China has developed, so has the packaging industry. By the end of 2005 there were over 1,600 domestic packaging machinery manufacturers capable of producing almost two thirds of the 4,000 different packaging machines produced globally. In this respect, as in many others, China has absorbed and assimilated new methods and technology at a staggering rate. Currently most of the imported equipment in China comes from within the Asia Pacific region, with suppliers from Taiwan and South Korea, Japan being amongst the most successful. In the last few years the value of packaging equipment imported annually has reached around USD 2bn, China packaging machinery import market the second largest in the world. In general thus market primarily consists of higher value, higher technology equipment with domestic suppliers able to manufacture equipment to meet the needs at the lower end of the market. Despite the sectors dependence on imported technology, the technological progress of domestic producers is rapidly approaching international levels. To this end, many in the industry have compared the market to that of Korea of Taiwan ten to fifteen years ago. Regions that are now both among the most technologically advanced in the world in packaging terms. Surging demand, and recognition by the central government of the strategic importance of the sector, has helped to fuel development in the packaging industry. In light of this, China recently received approval to 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 10
    • China Intelligence Online www.chinaintelligenceonline chinaintelligenceonline.com establish the Asia Packaging Centre ( (APC) in Hangzhou, Zhejiang Province, under the World Packaging Organization (WPO) and the Chinese State Trade and Economic Commission. ) Focusing on packaging manufacturing, the APC will be to integrate new technology - e.g. environmentally friendly packaging, operation, recycling packaging w tion, waste – managerial, trade, information, and service best practices into the domestic industry. It is hoped that establishment of the centre will help China achieve global levels of excellence in the industry, as well as associated knock on effects across th economy as a knock-on the whole. The table below illustrates CPTA membership by sector. Members of the China Packaging Technology Association by sector Plastics packaging Paper packaging Packing machinery Packing decoration and pronting Metal packaging Glass packaging Others 7% 5% 27% 9% 18% 26% 8% Source: CPTA 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 11
    • China Intelligence Online www.chinaintelligenceonline.com 6.2 Growth trends and industry forecasts China’s Packaging Products Output Value (USD billions) USD billions 2001 2002 2003 2004 2005 2006 2007 2008 (estimated) (predicted) (predicted) (predicted) Paper Packaging 15.58 17.12 18.81 20.67 22.72 24.76 26.99 29.42 Plastic 3.62 4.07 4.57 5.14 5.78 6.41 7.12 7.90 Packaging Glass Packaging 5.41 5.76 6.12 6.51 6.93 7.35 7.79 8.25 Metal Packaging 2.21 2.40 2.61 2.83 3.08 3.33 3.59 3.88 Others 1.66 1.67 1.68 1.69 1.70 1.71 1.72 1.73 Total Value 28.48 31.02 33.79 36.84 40.21 43.56 47.21 51.18 Source: CPTA In general, in almost every aspect of Chinese life, price is a critical factor. Consumers are generally thrifty, and like to save money. What this means is that in many of China’s poorer and less developed regions consumers often cannot afford to purchase packaged goods – particularly in the primary in primary produce sector. However, as overall growth of the Chinese economy develops and disposable incomes rise, a propensity for conspicuous consumption is beginning to take shape as can be seen in the more affluent regions of the country such as the east coast. This general improvement of living standards, coupled with burgeoning consumer awareness, means that the potential growth of the packaging market in China’s primary industrial centres is set grow at a rate far outstripping that of overall GDP growth. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 12
    • China Intelligence Online www.chinaintelligenceonline.com As consumer awareness develops, and the Chinese move toward an increasingly consumption led lifestyle, consumers are increasingly looking beyond straight functionality from product packaging. In the developed markets f of China’s economic hubs – namely the Pearl River Delta (PRD), the Yangtze River Delta (YRD) and the Bohai Bay) consumers are increasingly expecting packaging to incorporate considerations such as aesthetics, and how the product communicates lifestyle messages to the consumer. For these reasons packaging has until recently been primarily consumption driven – as opposed to technology driven. OTC packaging has seen a dynamic performance in recent years, influenced by a number of issues, including the gradual de-listing of medicines from the state medical insurance list, which meant that fewer drugs were eligible for reimbursement. As a result, the trend for self-medication has grown creating additional packaging demand for OTC products during this time. Meanwhile, folding carton and blister and strip packs have shown rapid growth, increasing nearly twofold in usage since 2000. Growing from a low base, the Chinese plastic packaging industry has hurtled past film technologies due to advantages such as light weighting. Furthermore, because small production facilities are able to produce high-volume plastic packaging converting, small and medium-sized enterprises can compete in the industry. As China gradually continues to replace glass and metal with plastic, the sector projects steady growth well past 2008. Demand from food and beverage end-users has driven growth well past 10 percent annually, unsurprising considering that the plastic industry comes from a low production base, requires more sophisticated technology, and competes for feedstock with ‘priority industries’ in several fields. Industry spending on plastic packaging equipment has grown steadily at 11 percent, a rate it projects to maintain beyond 2008. By the end of 2008, China’s equipment budget exceeded USD 30bn, roughly three times greater than 2000-2003 levels. A decline in demand for locally produced alcoholic spirits led to relatively low aggregate growth in the alcoholic drinks industry as well as a decline in demand for HDPE bottles, flexible plastic, and other packages. Health awareness and a diminishing core consumer base contributed to this decline. Flexible plastic at present dominates the packaged food sector, attributed to its low coast, efficiency in preserving shelf life, and its malleability. Noodle and rice, bakery, and ice cream—all high volume products in China—use flexible plastic, account for its impressive growth. Many manufacturers have begun using flexible plastic packaging for goods that normally use more solid material, such as milk and non-grape wine. While often not practical, use of flexible packaging helps manufacturers widen their consumer base. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 13
    • China Intelligence Online www.chinaintelligenceonline.com In urban areas, blister and strip packs have seen wider use in the packaging of confectionery products, appealing to more upscale consumers who consider factors beyond price in their purchasing decisions. Usage of blister and strip packs in pastilles, gums, jellies and chews has led to industry growth in recent years. Beer, which accounts for almost 75 percent of glass bottle usage, is the largest end-use application for glass bottles within alcoholic drinks as a result of savings made by returnable bottles. The arrival of high-quality, less-alcoholic spirits on the market could cause an upturn on pottery-based containers, an industry expected to reach volumes of 1.4bn units by 2007. The impressive growth of the soft drinks market has caused a 20 percent growth over the past five years in the annual consumption of PET polyester bottles, within which hot-fill PET bottles proved especially popular. Much metal and glass beverage packaging has given way to PET polyester in the ever-growing soft drinks market. Why are PET bottles so successful? In addition to being lightweight and unbreakable, PET bottles are also re- closable, an advantage it holds over competing forms such as metal and glass. As health-oriented products like Asian speciality drinks boomed in popularity, PET bottles likewise prospered. Should beer also deviate from glass packaging, PET’s status stands only to improve. Metal beverage cans, though, are not going away. Their use in juice drinks, seen as a healthier beverage than carbonated soft drinks, as well as their trendy image among young people have contributed to their enduring popularity. In the non-food category, flexible packaging thrives due to its extensive use by the tobacco industry, whose large size guarantees market dominance. Pouches have a small but growing role in pet food and pet care products and household care. In pet food, their ease of use and premium appeal in wet cat and dog food accounted for dynamic growth in recent years. In household care, the successful application of plastic refill pouches in automatic liquid detergents and fabric softeners is likely to pave the way for the application of refill pouch packaging in a number of other categories, ranging from shampoo and liquid soap to bath additives and body wash/shower gel, much like in Japan. Pouches, used in pet food, pet care products, and household care, have grown in importance in recent years. In pet food, their ease of use In the cosmetics and toiletries field, glass has assumed a wider role as it is seen as a higher-end packaging medium for goods such as nourishers and anti-agers. PET bottles have also become more popular in the 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 14
    • China Intelligence Online www.chinaintelligenceonline.com industry. To common products such as shampoos and facial cleansers, PET bottles convey a more aesthetic image. PET bottles also dominate the household care market, as they can provide differentiation in high-volume product areas such as hand dishwashing, kitchen cleaners, and multi-purpose cleaners. Technological developments have made liquid cartons more attractive in recent years, and as such economic growth is expected over the next three years. The dynamic health-oriented beverage boom has also helped liquid cartons immensely as they have been used in this industry. Furthermore, PET’s replacement of metal beverage cans and glass bottles may ensure that its success will not be short-lived, as rigid plastic may grow for longer than the next three years. Environmental concerns and stricter legislation may also play a large role in the packaging industry. Manufacturers have begun using more recycled content in their production, and products themselves have become more easily recyclable. Biodegradable plastics are projected to grow at the expense of less environmentally-friendly products. Additional functionality and added convenience join improved safety as trends to watch in the food and beverage packaging industry. For example, pouches that have handles and pouring spouts are being used to boil water, making inroads in the soup and sauce packaging markets. In general, package types of all sorts have a bright future in China given the country’s consistently surging economy. Because of its low cost and high versatility, flexible packaging will play a large role in the projected volume increases of packaged food. As homes in China become smaller and consumers snack more, the future of flexible packaging will remain bright for the foreseeable future. • Output of paper packaging is expected to reach 19m tonnes this year creating an average annual increase of 8%; in 2010 it will is predicted to reach 27m tonnes, an average annual increase of 7%, and in 2015 36mn tonnes, an average annual increase of 6%. • Output of metal packaging is predicted to reach 2.88mn tonnes this year, an average annual increase of 7%; in 2010 3.85mn tonnes, an average annual increase of 6%; and 4.91mn tonnes in 2015, an average annual increase of 5%. • Output of glass packaging is predicted to reach 10.5mn tonnes, an average annual increase of 5% this year; 12.7mn tonnes in 2010, an average annual increase of 4%; and by 2015 15.5mn tonnes, an average annual increase of 4%. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 15
    • China Intelligence Online www.chinaintelligenceonline.com • Output of plastic packaging is predicted to reach 5mn tonnes, an average annual increase (8%) by the end of 2005; in 2010 7.07mn tonnes, an average annual increase of 7%; and 9.46mn tonnes in 2015, an average annual increase of 6%. • Output of packaging machinery is predicted to reach 670,000 racks, an annual increase of 8%; in 2010 930,000 racks, an average annual increase of 7%; and 1.2mn racks by 2015, an average annual increase of 6%. Machinery in greatest demand is likely to include bag making, filling-sealing packaging machinery, corrugated paper carton production equipment, metal packaging container processing equipment, pulp and moulding processing equipment, and vacuum packaging equipment 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 16
    • China Intelligence Online www.chinaintelligenceonline.com The table below gives actual production figures to 2003 and estimated figures from 2004 to 2008. China’s Packaging Products Output Value (USD billions) USD billions 2001 2002 2003 2004 2005 2006 2007 2008 Paper Packaging 15.58 17.12 18.81 20.67 22.72 24.76 26.99 29.42 Plastic 3.62 4.07 4.57 5.14 5.78 6.41 7.12 7.90 Packaging Glass Packaging 5.41 5.76 6.12 6.51 6.93 7.35 7.79 8.25 Metal Packaging 2.21 2.40 2.61 2.83 3.08 3.33 3.59 3.88 Others 1.66 1.67 1.68 1.69 1.70 1.71 1.72 1.73 Total Value 28.48 31.02 33.79 36.84 40.21 43.56 47.21 51.18 Source; CPTA: 2001 and 2003 are actual production value figures, 2004 to 2008 are estimates 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 17
    • China Intelligence Online www.chinaintelligenceonline.com 6.3 Paper packaging industry 6.3.1 Paper packaging Efforts by the Chinese government to implement restraints on overheating industries and to reduce fixed asset investment did not curtail paper packaging industry growth in 2004. Paper and paperboard consumption rose to 54.4mn tonnes and production volume reached 49.5mn tonnes, trailing only the US. The government also plans to invest CNY 490bn into the sector between 2001 and 2015, an average of CNY 32bn per year. Corrupted paperboard consumption likewise is projected to reach 15mn tonnes in 2005, partially causing an estimated 10mn shortfall in the paper-pulp supply that year. While Chinese paper industry output accounts for 10% of world output, second only to the US, China still imports a large number of paper products. 6.3.2 Industry development The paper packaging industry is developing well; by 2010, industry volume is projected to reach 27bn tonnes, even with Chinese macroeconomic restraints. Consumption is expected to reach 70mn tonnes by 2010 and 100mn tonnes by 2020, a figure matching projections for the US market. New machines intended to increase production, as well as measures intended to improve existing machines could spur even faster industry development. While China is a major consumer in the aggregate, its per capita consumption is only about half of the global average at 30 kg/year. Machine-made paper and paperboard output is forecast to reach 39.2mn tonnes by the end of 2005, with a compound annual growth rate (CAGR) of 4.8 to 5.9%. With market reforms and the emergence of a robust capital market, China’s pulp and paper industry ranks as one of the world’s most dynamic. Once dominated by state interests, less than a quarter of companies in the industry have a government stake in ownership. Opportunities in the market abound. As more paper and pulp manufacturing shifts to China, demand for packaging material will soar. Domestically, demand continues to grow especially in the coastal regions. Modern facilities will eventually replace small, local mills producing paper from straw, further offering growth potential. As domestic production replaces imports, opportunities for Western producers will only increase. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 18
    • China Intelligence Online www.chinaintelligenceonline.com The following table shows the major paper product forecasts for 2005. Products 2000 2005 Newsprint 1,450 2,300 Paper used for writing, printing 7,600 10,000 Paper used for living 2,500 3,200 Paper used for packing 4,200 4,600 White paperboard 2,500 4,000 Carton board 3,700 6,400 Corrugating medium 5,500 7,200 Specialty paper and paperboard 600 1,500 Source:CBS: (Units 1000 tonnes). Figures for 2005 are estimates Widespread consolidation within the fragmented Chinese paper industry should cause the emergence of large paper manufacturers, causing productivity and overall production capacity increases as well as a reduction in employment. These changes will aid industry productivity and efficiency. The printing industry, the main customer of the paper industry, is developing quickly, boosting demand for certain types of paper. Structural problems remain. The paper manufacturing industry has an unrationalised industrial structure, and distribution remains scattered. Pulp and paper manufacturing was once measured for local demand, limiting the production capacity of various enterprises. Not all paper companies are similar, either; their scale and technology vary greatly. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 19
    • China Intelligence Online www.chinaintelligenceonline.com Manufacturers have also felt pressure from new environmental measures forged by an increasingly-attentive government. China has published a series of new environmental protection regulation that will require paper manufacturers to upgrade equipment and technology to meet new standards. Foreign companies salivating at the prospect of entering the paper manufacturing market need also be aware of these difficulties and risks. Foreign companies considering entering the paper market in China must plan for their fibre supply. China’s fibre shortage makes the industry reliant on imported pulp and waste paper. While this fact pleases global producers wary of pulp overcapacity, companies pondering production in China must be prudent. 6.3.3 Chemicals in the Chinese paper industry 2005 Demand for pulp and paper chemicals in China have grown rapidly in the past decade, and continued growth over the next five years at 7.5% annually is projected. By 2010, the Chinese market in pulp and paper chemicals is expected to reach 8.16mn metric tonnes. As such, China is likely to remain a major exporter in the industry throughout the century. Pulp and paper imports, too, will continue in China as top grade products supplied by the domestic market are inefficient. By the year 2005, pulp and paper chemical imports are expected to grow by 8.9% annually to just under 500,000 metric tonnes, roughly 90% of export value. Needless to say, the pulp and paper chemicals industry will remain a hot spot for foreign investment in coming years. 6.3.4 Paper packaging products Products that helped create surging demand for paper and pulp in recent years include: • Shopping bags, including carrier bags, gift bags, and other shopping bags • Packaging of food, grain and animal feed, mainly for flour, grain, animal feed, sugar, starch, French bread, roasted chicken as well as air sick bags and even cook caps • Packaging of building materials and chemicals, mainly for cement, chemicals, dry mortar, etc • Carton boxes, including gift boxes, accessory boxes, and all sorts of colourful boxes • Kraft paper cases • Kraft Paper displays • Paper towels and napkins 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 20
    • China Intelligence Online www.chinaintelligenceonline.com 6.3.5 Paper and the paper product import market China imports several million tonnes of paper and paperboard annually. Demand for high-intensity corrugated raw paper is especially high, and with consumption increasing fast and domestic supply lagging this situation is unlikely to change over the next several years. Import values continue to increase, and a shortfall of 1mn tonnes is projected for2005. Due to decreasing tariffs, the proportion of imported products in total consumption is projected to rise gradually to 25% by the end of 2005. China ideally would like to reduce its dependence on imports by developing indigenous resources and encouraging foreign investment to bolster domestic paper production. Main import products in 2004: Paper pulp, paper and paperboard, newsprint, brown paper, corrugated raw paper, inorganic daubing cloth paper, machinery and spares used in paper and paper product production. 6.3.6 Food processing & packaging (P&P) Modern, fast-paced lifestyles and increased disposable income have changed traditional eating patterns, increasing dependence on packaged and processed foods. As a result, the P&P industry is now China’s third largest of any kind. The China Packaging Technology Association estimates that industry output will reach RMB 320bn, an annual increase of 8%, by 2005. However, outdated and unsophisticated machinery, machinery shortages, and other factors explain industry underdevelopment. In response to the growing need for a complete upgrade of the food processing industry, the number of domestic enterprises devoted to the production of food processing and packaging machinery has risen dramatically, of which almost all enterprises are small to medium sized. Although a large number of P&P machines can now be produced in China there is still a significant market for foreign machine manufacturers. A large number of companies devoted to food processing and packaging have cropped up in China, responding to a need for the complete upgrade of the industry. While a great number of P&P machines can be produced domestically, foreign manufacturers will still have a lot of opportunities in the industry. Future development of China's food processing sector will be constrained by the following major factors: • Poor management. • Inadequate logistics. • Low levels of technology. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 21
    • China Intelligence Online www.chinaintelligenceonline.com • Lack of capital for small and medium sized enterprises to purchase cutting-edge food handling and packaging machinery from abroad. In a sense, the P&P industry faces a Catch-22; it needs foreign capital through exporting processed foods, yet it cannot generate enough capital to produce food meeting worldwide standards. 6.4 Plastic packaging industry Plastic packaging consumption reached 54mn tonnes in 2004, and current estimates forecast that plastic will surpass paper packaging by 2008, necessitating an annual increase of 3%. Plastic packaging dominates the industrial goods market in China. More than half of the country’s annual output of cement is transported in woven plastic bags, as supplies of paper and jute are inadequate. Further demand for plastic packaging is generated by primary industrial goods like mineral and chemical products, synthetic resin, crude salt, sugar, cotton, and wool. China presently can produce a many different kinds of packaging film, including BOPS sheets, CPP film, three- layer, five-layer and seven-layer co-extruded films, vacuum aluminium-plated films and other composite films, high-barrier PVC casing films, and coated films. The industry also produces beverage containers and various hollow containers of diversified, foamed plastics, extrusion web, extruded foamed sheets, and vacuum forming plastic products. China remains one of the world’s largest grain producers with an annual output of 500mn tonnes, indicating an enormous need for plastic agricultural packaging. Changing lifestyles—and a corresponding change in Chinese eating styles—likely will also foster increased demand in the quality and variety of packaging materials. Fractional-package grain, for example, has become fashionable in certain cities. The fast-growing food, beverage, medicine, cosmetics, and scour industries will create substantial demand for composite membrane, packaging film, containers, and reusable containers. Experts in the field expect that the future research and development in plastic packaging will focus on improving the barrier property, high and low temperature resistance, and photo-degradation property of plastic materials. Improvements are possible through innovations in plastic packaging processing techniques, like physiochemical properties as air tightness, light transmittance, resistance to erosion, preservative quality, and aging resistance. Synthesising and extruding techniques, high barrier-property materials, and multi-functional packaging like preservative packaging, high-temperature resistant film and electrostatic prevention materials, BOPE— whose high transparency makes it suitable for wet-synthesising with other materials—and low-temperature 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 22
    • China Intelligence Online www.chinaintelligenceonline.com heat-sealing have also established themselves as matters of importance. Experts have also directed attention to the domestic development of edible packaging. Material in plastic packaging has grown rapidly in the last 20 years and has assumed an important role in the China packaging market. Technology in the field has progressed markedly to levels of more developed countries, and demand for material continues to grow at an impressive 12% clip. Meanwhile, new products keep emerging. 6.4.1 Industry trends A significant trend in plastic packaging has been the use of BOPP and BOPET film in a march towards diversification, higher quality, and symmetrical lamination. Applications have continued to expand in markets like printing, lamination, coating, adhesive tapes, cigarette packaging, pearlescent film packaging, and vacuum aluminium plating. Capacitors and metal-filmed containers are also applications. BOPA film, with its good barrier performance and puncture and fluid resistance, is ideal for retort pouches and cold-vacuum packaging of fresh meat, cooked hams, and flavoured food. In 2005, production capacity is projected to reach 20,000 tonnes. Composite Flexible Packaging Dominating the Market Currently, plastic packaging material is tending toward high performance, versatility, and environmental friendliness. Within the plastic industry, high-performance multi-functional plastic material—which includes a large variety of plastic packaging materials like high-barrier and multifunctional freshness-preserving film—has emerged as a key highlight. In particular, high-barrier and aseptic packaging have undergone remarkable growth in recent years. High-barrier multifunctional film is targeting higher-level development, as technical progress in inks and adhesives have triggered multi-functional packaging materials. In response, the traditional composite film industry now aims to produce films of higher-standards, larger scale, and better effect, a significant set of reforms. International standard high-precision roller scanners, platform-level scanners, and leading plate- making equipment have replaced conventional plate-making processes, a major reform. Packing film development has also resulted from offset, gravure, flexo, and silk-screen colour printing systems, all currently a major part of bag-making equipment. In addition, tamper-evident packaging film has undergone regular growth and has become a key focal point in plastic packaging. Two trends--rapid economic growth and environmental consciousness—have resulted in technological and product enhancements. Consumers now have higher requirements for daily goods packaging, food 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 23
    • China Intelligence Online www.chinaintelligenceonline.com packaging, and industrial packaging, all the while minimising waste. Manufacturers, in response to these demands, have focussed on making films and containers lighter and thinner. Ultra-tough, easy-to-process, and ultra-thin film materials have emerged as the key element in responding to these trends. Materials such as Borstar PE, metallocene PE, PP and polystyrene alloy have produced a greater variety of choice for plastic packaging, allowing co-extrusion technology for packing film and container to develop. Further developments have included changing the dry-laminating method focussed on bi-directional stretched materials, adoption of co-ex lamination, and rationalising the structure of flexible plastic packaging. E-layer co-extruded (LLDPE and PP) heat-shrinkable films, in this way, have undergone greater development. Demand for co-extruded film by supermarkets and groceries is projected to increase by 50% over the next four years. As one of the world’s largest agricultural powers, China produces more than 73mn tonnes of vegetables and 50mn tonnes of fruit each year in addition to large amounts of grain products, pot foods, local flavoured foods, and aquatic products. This—coupled with the fast growth of supermarkets, is to create promising opportunities for the development of high-barrier multifunctional co-extruded films. Of all heat-shrinkable packaging material, film is highly recommended on the international market, whether co-extruded by LLDPE (as a middle layer) and co-extrusion-grade PP (as outer layers), the material features several advantages. Single-layer film, for instance, has found a home in sectors including fast food, ceramics products, tea utensils, and machine parts. Heat-shrinkable film also has applications in the military machines and metallic tools sectors; heat-shrinkable film with gas-phase antitrust technology substitutes for coating and antirust oil, allowing guns and springs to enhance their antirust capabilities. Multi-layer heat-shrinkable film have also penetrated sectors such daily- use goods, health products, medicine, stationery, cosmetics, and A/V products. Wraparound plastic film, better known as elastic film or wrapping film, derives from LLDPE and is a copolymer of ethylene and hexylene or caprylene. Within China, ethylene-butylene melt with 1-2 in melt index and 0.98 density is most prevalent. In process, China has adopted blow moulding and casting processes that can be produced on single-layer casting equipment or three-layer co-extrusion casting equipment. Wraparound film also offers several advantages unique to packaging film: self-adhesion, the elimination of heat-shrinking treatment in the packaging process, the reduction of energy consumption and packaging costs, the wrapping into one single unit, the ease of loading and unloading, the promotion of transport efficiency, and the reduction of transport costs by using “integrated loading and unloading” methods integrated with pallets and trucks. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 24
    • China Intelligence Online www.chinaintelligenceonline.com The use of plastics in aseptic packaging augurs well for the latter industry, which could develop rapidly. Aseptic packaging takes sterilised foods, such as beverages or dairy products, and encloses them in sterilised containers, providing a lengthy shelf life without preservatives or cold storage. While non-aseptic packaging takes packages and sterilises them along with containers, aseptic packaging sterilises products by instant ultrahigh-temperature or microwave sterilisation, a process that requires less than 20 seconds and minimises loss of nutrition and flavour. Aseptic plastic packaging packs and cups have both grown considerably in China in recent years. These aseptic packaging packs refer to 5-220L (1,000L maximum) laminated film bags that are placed in wooden crates, cartons, or steel barrels and used for tomatoes, fruit juices, and syrup packaging. Most of these packs are made with PET aluminium-coated film and PE. Aseptic packaging cups, meanwhile, use multi-layer co-extruded sheets—including PP, PE, EVA, PVDC, and PS. During the packaging process, when PP is stripped off the aseptic PE surface is exposed and completes the entire moulding, filling, and capping process. EVA serves as the adhesive layer while PVDC is used to package food in order to achieve longer shelf life. At present, the Chinese aseptic packaging market accounts for only 5% of the beverage packaging market and 10% in the dairy product packaging market, far less than the average figure of 65% seen in developed countries. However, per capita milk consumption at 5.1kg is nearly 5 times less than the global average while fruit juice consumption also ranks far below global standards. Logistical problems—an estimated 20% of produce is lost or damaged in the process of storage, transport, and marketing—has been a major obstacle to the Chinese fruit and vegetable market. Packaging ensuring the safeguard of fresher products thus will be forthcoming. Currently, PE and PP films remain dominant in the fresh fruit and vegetable packaging sector. Different fruit and vegetables differ on freshness-preservation packaging requirements. In general, the choice of film bags depends on the following considerations: • Optimal breathe-ability to maintain O2 and CO2 concentrations at ideal level. • The addition of an ethylene gas absorbing agent. In the after-harvest maturing process, fruit releases ethylene gas and generates plant-growth hormones. The build-up of ethylene in packaging bags may accelerate the fruit aging process and reduce shelf life. To solve this problem, it is required to add porous substances such as silicon elements (zeolite, oyamycin, cristobalite and SiO2) in the film- production process to absorb ethylene and thus keep it fresh. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 25
    • China Intelligence Online www.chinaintelligenceonline.com Beverage production in China is growing at 20% per year. Within the carbonated beverage packaging sector, which continues to offer bright market possibilities, PET bottles maintain a market share. The two largest PET polyester bottle producers in China are Zhuhai Zhongfu and Shanghai Zijiang Group, enjoying market shares of 30% and 20% respectively. A latecomer to the plastic packaging industry, the polyester bottle has enjoyed rapid growth and has won a large market following from customers due to the wide introduction of injection-stretch-blowing (ISB) equipment. Within a few years PET bottles began dominating the edible oils and beverage packaging bottle industries, and at present enjoy the highest growth of all plastic packaging materials. Sectors such as cosmetics and medicine, likewise, have begun using polyester bottles more extensively. China’s massive tea beverage industry has also helped increase market visibility. The arrival of PP clear packaging bottles shook up the Chinese plastic packaging sector. With the development of transparency modifiers and nucleating agents, PP clear bottles have added application in thermoform containers and food and drug bottles. These bottles are of reasonable price and promise enormous market opportunities as a competitor to PS, ABS, PET, and PE bottles. Use of PET packaging bottles has skyrocketed in recent years. The development of PET bottle coating technology, coasting a 0.21mm carbon on the inner surface provides a barrier capability as does glass and can manage superheating, expanding its versatility and making it suitable for packaging hot-tea beverages. New-type polyester packaging has also become tremendously important in beer packaging, as the persistent problem of beer bottle explosions forced innovators to seek new solutions. PEN and PET packages share similar molecular structures; therefore with a benzene ring rather than a naphthalene ring, PEN will have a better barrier, higher UV stability, and better thermo-stability than does PET. PEN, though, does cost five times that of PET, preventing its more widespread use. Recently Zhuhai Zhongfu has expanded its research with high-priced investment into the development of co- injection technology and bottle-blowing technology, both efforts to extend preservation of beer to 100 days. Having experimented with 350ml and 500ml PET bottles and in the process of manufacturing 1.5L to 2L bottles, the company has invested in a large new plant that is expected to spur faster growth. Purified drinking water bottles are ubiquitous in Chinese households, with many families opting for the 5- gallon barrel that is dominated by PC, PVC, and PET packaging. However, the latter two have caused some concern; PVC drinking water barrels have reported toxic additives, while bacteria levels in some PET drinking water bottles have tested as unacceptably high. One survey revealed that over half of barrelled purified bottled water in some parts of China was substandard, attributable to substandard materials used in the barrelling process. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 26
    • China Intelligence Online www.chinaintelligenceonline.com As a result, the need for food-grade PC materials has become pressing. Shanghai has signed an agreement with Bayer to construct a 10,000 ton PC resin plant. The Phase I of the project was commissioned in 2003 with an output of 50,000 tonnes, potentially alleviating long-standing demand for imported PC. Production facilities in Shanghai and Guangdong alone have produced more than 50mn barrels, attesting to the quick growth of massive potential of the market. Bottled water accounts for about a quarter of overall beverage output at 5.5mn tonnes. Competition within the Chinese market has fostered some robust enterprises like Wahaha, while the range of available products have expanded into distilled water, activated water, oxygen-rich water, and space water. Further development is in the works. Accordingly, the market is imposing higher requirements on the quality of packaging bottles, a market sure to explode in future years. The presence of toxic agents registers as a major concern in the food packaging industry, particularly packages that come into direct contact with food. Films made of materials such as OPP, BOPP, PET and PS have gradually replaced PVC, and these too may come into competition with edible packaging, the latter having become quite popular recently. Plastic, the most popular packaging material of any kind, has experienced ever-increasing popularity in the field, a trend likely to persist for the foreseeable future. 6.4.2 Industry needs Environmentally-friendly cement has arrived from overseas and has entered the China market, having been introduced into 30 non-solvent lines. Though consumption of non-solvents has gradually increased, supply is yet to meet demand and costs remain high. Anti-staling film, used to prolong storage life, has undergone a rapid increase in demand, exacerbated by the increasing prevalence of microwave ovens in Chinese homes. Flexible packaging materials, once the exclusive domain of food packaging, is now used in industry packaging, medicine packaging, building material packaging, and cosmetic packaging—with further applications likely in the future. Demand for coextru-film, used for food sundry packaging in supermarkets, is projected to increase by 50% over the next 3 years, including 2005. The development of agricultural exports indicate tremendous opportunity for high-intercluding and multi-functioning coextru-film. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 27
    • China Intelligence Online www.chinaintelligenceonline.com 6.4.3 Packaging printing Printing business across the sector have diversified and developed alongside China’s packing industry. Due to the relatively low technological levels within the sector, any changes bring vast potential to the market. Investment, though, has failed to keep up with the industry as a whole, preventing development from being even more impressive as a whole. By 2000, the Chinese packaging industry was a mixture of several different types of enterprises, including state-owned, collective, private, joint-stock, and different kinds of foreign-invested businesses. More recently, trends within the industry indicated that packaging is moving to a more conventional orientation, with rapidly increasing competition. This detail shows the increasing maturity of the industry, particularly in regards to enterprise management. Main industry problems: • Uneven development and evident gaps between East and West China. • A substantial shortfall in creativity, and design. • A lack of innovation and qualified personnel. • Excess capacity at the low-tech end of the market, under capacity at the high tech end. 6.4.4 Packaging printing machinery industry China’s demand for printed products and by extension printing materials and printing machinery has surged in recent years. As a result, the printing industry and printing equipment industry has developed fast. The import and export volume of printing equipment and printing material has risen rapidly in China and there is currently a strong demand for imported high-grade printing equipment and printing material. Advancements in the material level of the packaging industry have resulted from technological improvements in printing as well as a growth in sales. Strong competition and industrial realignment have stalled the industry somewhat; low-profit has recently been the norm. Gradually, supple-printing machines in China will convert to wide-satellite size, despite its higher price than narrow-set. Decisions based on competitive pricing, thus, are becoming more common. In equipment upgrades, after-sales support is likely to become a very important factor in purchasing decisions, as firms with the most advanced technology and technical support are favoured. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 28
    • China Intelligence Online www.chinaintelligenceonline.com At present, the industry is attempting to develop international paper-case printing technology and creative printing machinery equipment. In the latter years of the 20th century, Chinese paper-case machinery industry experts travelled abroad to study the industry in several developed countries, such as Japan and the US. Corrugated paper-case printing is developing to high levels and is almost meeting domestic and foreign demand placed. 6.4.5 Digital printing Already used in package label design and the production of commodity labels for food, beverages, and other products, digital printing enables direct plate making via computer without the use of film in the pre- pressing process. In addition, digital printing plays an important role in flexible packaging, adding to a sense that demand for digital printing will develop right alongside the Chinese economy as a whole, or perhaps even more quickly as digital printing overcomes traditional means. This day remains in the future, though— at present digital printing comprises only a small percentage of the overall market. 6.4.6 Ink Environmentally-sound inks have attracted increased interest from printing producers, as the industry’s growth rate is projected to exceed GDP growth. Well-known international ink firms such as Toyo, Sakata Inx, Dic, Flint, and T&KTOKA have already invested in China. 6.4.7 Metal packaging Metal packaging products, including cold and hot rolled-late, are estimatd to reach 2.8mn tonnes in 2005 with an overall output value of USD 3.08bn, with further development in terms of specialisation and integration expected. Primary products within the industry include aluminium tow piece cans, tinplate-three piece cans, spray cans, pop-top cans, 20 to 200 litre steel barrels, and more. With an overall output comprising 10% of the packaging industry as a whole, metal packaging remains an important part of the industry. The industry primarily deals with foodstuffs, cans, beverages, chemical engineering, medicine, and cosmetics. At present, technical levels within the industry have reached a relatively advanced level. There are at present 26 complete double-sheet can production lines, and production capacity is over 11bn units per year, although present market demand is only 7bn. There are over 500 tin plate tri-sheet production lines, a mix of both foreign and domestic models, fully-automatic and semi-automatic, and the products supply the beverage industry with about 4bn units a year and the food industry food with about 3.8bn units a year. There are nearly 300 complete crown-cap production lines in China, over 90% of which are foreign manufactured. Furthermore, there are 500 lines of metal printing instruments printing more than 16bn units 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 29
    • China Intelligence Online www.chinaintelligenceonline.com a year. Altogether total demand for tin plate is 1.40mn tonnes. With tin plate productivity improvement in China imports will decrease gradually to almost self-sufficiency soon, however some high-quality products will still be needed for import for the foreseeable future. There are also more than 300 complete crown-cap production lines in China, of which 90% are foreign manufactured. 500 lines of metal printing instruments print more than 16bn units per year, contributing to a total demand for tin plate of 1.40mn tonnes. Tin plate productivity improvement will ease Chinese demand on imports within the industry, and self-sufficiency is a feasible goal with the exception of certain high- quality products. With an annual per capita amount less than 1.5 kg, tinned food consumption in China is very low; by comparison, consumption in Japan equals 23 kg and Europe 50 kg. Supply is greater than demand in the metal packaging market, and as a result per capita consumption growth is the focus of industry development. The food and drink industries are the biggest users of metal packaging in China, followed by the chemical engineering sector and then cosmetics and medicine. As living standards, consumer choice, and related industries grow in the country, metal packaging is likely to follow suit. Manufacturers of drinking products are developing a number of new brands, and double sheet and tri-sheet cans have proven to be competitive, particularly in the beer, chemical, engineering, petrol, medicine, and cosmetic sectors. Major obstacles in the sector include: • Insufficient administrative macro-control • Disordered competition; SOEs and industry subsidies create market distortions and confusion. 6.4.8 Glass packaging China’s market for glass purchasing—including bottles, jars for food products and beverages, and flasks for perfume and pharmaceutical products-- has enormous potential. Industry output value in 2005 is forecasted to be USD 6.93bn, though supply is in danger of not meeting increased demand. The construction, automobile, electronic, electrical appliance, information, and pharmaceutical industries in particular have enormous needs in the glass packaging sector. A series of reforms enacted in recent years have spurred development in the Chinese glass packaging industry, though output growth rates are low and profits have yet to become realised. While some competitive domestic enterprises have emerged such as Qingdao Jinghua Glass Co., foreign-funded enterprises, joint-venture enterprises, and private enterprises are likely to play a major role in the industry. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 30
    • China Intelligence Online www.chinaintelligenceonline.com Industrial technology has made much progress in certain areas of the industry, though uneven distribution in technological access has caused disparities throughout the industry. While progress has been made in product structure, efficiency, technological input, product quality, and artistic design all lag behind other sectors within the packaging industry. In terms of consumer safety, anti-impact and sub-standard internal force-resistance remain areas of concern. The price of energy could present a significant problem to the industry. Energy accounts for 40% of production costs in the glass packaging industry, and while energy is presently priced as a commonwealth good—meaning below market value—inefficiency, waste, and energy shortages in the future could lead to a rethinking of this policy. Any change in energy prices would have a major effect on the industry. 6.4.9 Future developments The immediate goals of the industry in the near future are to greatly improve quality, safety, aesthetic content and versatility of product design, to raise productivity, efficiency, and the technical level of the industry in terms of both product and fixed capital assets by importing advanced foreign production capacity, and to reduce the industry’s dependence on energy and hence environmental impact. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 31
    • China Intelligence Online www.chinaintelligenceonline.com 6.5 Packaging machinery 6.5.1 Industry overview China’s rapid industrialisation has occurred across a broad array of industries, and manufacturing still accounts for 60% of GDP growth over the past decade. The packaging machinery is no exception. The table below shows global packaging machinery demand and relevant countries. Global Packaging Machinery Demand (% annual) Item 2003 2008 2003-2008 (%) Global packaging machinery demand 24,800 31,650 5.0 China 2,600 3,970 8.8 United States 5,470 6,750 4.3 Western Europe 5,970 7,310 4.1 Source; CPTA (Units USD mn) The packaging machinery industry, largely due to government support, is expected to grow at an average annual rate of over 20%. However, domestic supply cannot meet the needs of the industry, necessitating the import of advanced technologies and equipment. China has become the second largest importer of packaging machinery worldwide, with annual imports totalling around USD 2bn. Output of packaging machinery is expected to reach 670,000 sets in 2005 and 930,000 sets by 2010, evidence of industry focus on developing industrial and product reconstruction. The total domestic demand for food machinery and packaging equipment will reach approximately CNY 65bn (USD 7.9bn), with an annual growth rate exceeding 12 percent over the same period. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 32
    • China Intelligence Online www.chinaintelligenceonline.com The packaging machinery industry is one of the ten biggest machine industries in China, which has been one of the biggest producers and users of packing machines. However, there are still many problems facing the domestic packaging machinery sector. These include: • A shortage of macro-adjustment and control leading to disordered competition and inefficiencies within the industry • Lack of investment. Due to a general shortage of funds, investment in research and development only accounts for 1% of the average level of sales value, making it very hard for enterprises to innovate technologically • A shortage of professionally skilled persons 6.5.2 Competitor analysis China imports much of its equipment from neighbouring nations in the Asia Pacific region, with Japan being among the more successful due to its proximity to the market and wide experience in the sector. The following is an analysis of China’s primary competitors within the packaging machinery supply sector. Japanese suppliers While Chinese consumers consider Japanese products to be overpriced for their quality, they do praise the after-sales services of Japanese companies and the companies’ willingness to customise equipment to customer specifications. The success of Japanese suppliers in China is due to the following reasons: • Well-versed in Chinese culture and customs • Geographical proximity to China (especially helpful for product exposure and after-sales service) • Thorough understanding of the status and needs of the industry through extensive market research and familiarity with Asian foodstuff • Flexible sales approach; a willingness to customise equipment, superior after-sales service, a willingness to assist Chinese buyers with purchase financing problems, and flexible finance agreements • Advertising is well targeted and culturally appropriate • Often approach market as part of a consortium • Well represented at trade seminars and exhibitions • Willingness to enter into joint ventures with Chinese manufacturers and engage in technology transfer 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 33
    • China Intelligence Online www.chinaintelligenceonline.com European suppliers European machinery manufacturers have had a strong presence in the Chinese market for many years. The majority of these companies are from Germany, Italy, and Scandinavia. European companies benefit from experienced industry contacts within China and their flexibility towards the market, as well as attractive financing packages with government loans. Euopean companies tend to be well-represented at industrial seminars and international trade exhibitions partly due to government subsidies. Taiwanese suppliers While producing goods of relatively low-tech value and of mediocre quality, Taiwanese companies are popular in the Chinese market due to the inexpensiveness of their equipment. Chinese firms are typically more willing to purchase low-quality products if they happen to be inexpensive, owing to the lack of resources present on the mainland. Taiwan controls about 16% of imported food handling and packaging machinery in China. USA suppliers American food and processing machinery exporters have long struggled to make inroads in the Chinese market, due to the following reasons:. • Lack of familiarity with the market's needs • Insufficient participation in exhibitions • Insufficient participation in trade seminars and delegations • Unsatisfactory after-sale service • Lack of understanding of Chinese culture and customs • Unwillingness to customise equipment to suit buyers' requirements • Inflexible financing terms • Unwillingness to enter into joint ventures with Chinese manufacturers • Minimal advertising in Chinese language • Lack of consortiums for total solutions when approaching the market 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 34
    • China Intelligence Online www.chinaintelligenceonline.com Some well-known packaging suppliers in the China market: • KHS Maschinen-und Anlagenbau AG • Hofliger Verpackungsmaschinen GmbH, Harro • Romaco AG • Rommelag Kunststoff-Maschinen Vertriebsgesellschaft mbH • Mettler-Toledo Garvens GmbH • Siemens AG, Automation and Drives, Motion Control Systems • Rockwell Automation • Videojet Technologies, Inc. • KRONES AG • Rieckermann Pharmatech Limited • Lachenmeier A/S • Bizerba GmbH & Co. KG • MSK Verpackungs-Systeme GmbH • Unifill S.p.A. Domestic competition The presence of domestic manufacturers and foreign-based companies has enlarged in the Chinese packaging market, as many Chinese companies mature and foreign multinationals attempt to tap China’s enormous potential. While prospering in the Chinese market may not yet be easy, there are certain ‘tricks to the trade’. Entering into a joint-venture arrangement with a local firm reduces initial sunk costs and contract bid expenses. In any sort of enterprise, local knowledge is crucial and allows foreign firms to sharpen their competitive edge. As the Chinese market matures and more consumers value high-quality goods—even at higher expense— opportunities may proliferate for foreign players. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 35
    • China Intelligence Online www.chinaintelligenceonline.com Chinese producers still dominate the low-end technology market, though issues such as poor management, a lack of foreign capital, increased demand for high-end technological packaging, and product competition has limited the clout of domestic players in the market. However, the domestic industry only stands to develop in the future. 6.5.3 Opportunities for international firms Firms within China usually prefer to purchase less-sophisticated machinery from domestic sources to save costs, meaning that opportunities for foreign firms exist in the complex, high-performance machinery market. While price always remains the ultimate consideration, many Chinese firms have expressed a willingness to pay a 5 to 10-fold premium for foreign manufactured products deemed high-quality. At present, foreign-made packaging machinery operate more quickly, efficiently, and reliably than do their Chinese counterparts, making them preferable for all but the simplest applications. A reduced need for manpower and maintenance further explains the domestic interest in imported machinery. Overall, packaging usage in China grows at about 20 percent annually, and food packaging machinery imports continue to grow as well. Some promising areas include: • filling/closing machinery (including bottling or can-sealing machines) which constitutes about 50% of the total packaging equipment market; • packing/wrapping machinery which constitutes about 30% of the total packaging equipment market; • parts with a market share of about 15%. Increasing demand in China for high-quality packaging provides tremendous opportunities for international firms. According to China Customs, the quantity of packaging machinery imports (HS 8422) has grown in recent years while the sub-sectors of packaging/wrapping and parts for packaging machines has also increased, as have imports for parts of packaging equipment (HS 842290). Disperser packaging has become the most popular form of packaging in the pharmaceutical industry, while medicine factories have the following expectations about the mode: • Disperser packaging equipment must be fully integrated and have precision control. For example, firms must be able to link disperser packaging equipment with multifunctional boxing machines in order to form packaging manufacturing lines. • There is demand for new disperser packaging modes, including wallet packaging and packaging convenient for olds and paperboard disperser packaging. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 36
    • China Intelligence Online www.chinaintelligenceonline.com • Heightened sufficiency of on-line testing to promote end product qualifying rates. • Pharmaceutical manufacturers are attempting to simplify the procedure and hasten packaging speed to promote final production rates. • Medicine factories also want anti-fake label packaging. Additionally, China is increasingly using honeycomb paperboard packaging instead of wooden crates which also provides opportunities for international manufacturers of honeycomb paperboard packaging equipment. Machines in greatest demand include: • Complete sets of corrugated paperboard paper box making printing. At present a very large number of products, such as bicycles and fruits, are packed with paperboard motorcycles, while vegetables are reportedly switching to the mode in increasing numbers as well • Machines for medicine processing and packaging; complete sets of all kinds of medicine processing machines, especially high-speed, automatic and multifunctional packing machines and necessary composite packaging material. • Complete sets of ready-to-serve food production machines. The sets are mainly for instant noodles, porridges, dumplings, and buns. • Complete sets of beer and beverage’s filling machines especially high-speed, low spoilage/damage, precise measurement, multifunctional, fully automatic machines • Processing and packaging machines for fruits and vegetable processing and freshness preservation • Edible oil processing machinery • Fruit and vegetable processing machinery • Meat product processing machinery • Milk product processing machinery • Convenience food processing machinery • Beer and beverage processing machinery • Super-micro-particle pulveriser machinery 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 37
    • China Intelligence Online www.chinaintelligenceonline.com • Extrusion moulding machinery • Vacuum freeze-drying packaging machinery • Micro-capsule packaging machinery • Germicidal curing agent packaging machinery • Anti-stailing packaging machinery Other needs: • Bag forming-filling-sealing equipments/machines • Complete sets of beer and beverage’s filling equipments/machines • Measuring/filling equipments/machines • Wrapping and packing equipments/machines • Tying and packing equipments/machines • Aseptic/antiseptic sterile packing equipments/machines • Vacuum and ventilation packing equipments/machines • Corrugated paperboard production equipments/machines • Metal can production equipments/machines • Environmentally friendly packing equipments/machines • Paperboard production, carton production, paper box production and whole set printing equipment • Bag forming, filling and sealing equipment • Strip packaging equipment • Automatic packaging equipment • Whole set can production • Heavy bag packaging equipment • Food heat insulation packaging paper 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 38
    • China Intelligence Online www.chinaintelligenceonline.com • Encasement equipment and carton equipment • Farm product deep processing whole set equipment Materials in demand: • Degradable plastic: PTT from microbes, PET, PVA, PEN, BOPS • Flexible plastic: VMCPP, PE • Composite material: PEEK, PECK, PPS, BMC • Paper packaging: metal paper 6.6 End-user analysis Historically, most end-users in the food processing industry are small to medium-sized enterprises without the ability to obtain foreign exchange. Many of these companies used Chinese trade fairs to find new machinery. Their lack of foreign exchange resulted in a calculus by which end-users must sacrifice quality and efficiency for lower costs. This trend, however, may be changing; more Chinese end-users have developed an interest in obtaining higher-quality goods even if costs are much higher. State-owned factories (SOE): The vast majority of state-owned enterprises (SOE’s) are inefficient and use obsolete machinery, in spite of recent efforts to bring SOE machinery up to date. The very structure of SOEs, though, reduce their incentives to operate more efficiency or reduce labour costs through automated technology. Rural firms & township enterprises: Relatively efficient and profitable, rural firms and township enterprises have grown in number in recent years due to the assistance of the central government. For many international firms, dealing with these companies is an easier process than with the large SOE’s, due to the former’s relative absence of bureaucratic hassle. The best way to connect with these firms is to attend trade fairs and international exhibitions, which are regularly held throughout China each year. In general, Chinese firms tend to rely on word-of-mouth when purchasing machinery. Wholly foreign owned subsidiaries & Sino-foreign joint ventures: As foreign food processors continue to tap the China market, the demand for foreign-produced machinery has witnessed a corresponding rise. This group of end-users is already creating growing opportunities for 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 39
    • China Intelligence Online www.chinaintelligenceonline.com machinery suppliers and will continue to do so for years to come. NB: due to the fact that the food handling and packaging machinery industry is highly decentralized, there is no central industry coordinator responsible for maintaining comprehensive statistics and, thus, in the above statistics some inconsistencies may occur. Electronics: The Household & Electronic industry is one of the pillars of Chinese economy. In recent years, major brands of China's household appliances and electronic products have been thriving both in production and marketing, which would inevitably encourage the demand for package and bring great business opportunity for domestic packaging industry and overseas famous suppliers. The Household and electronics industry has long been among the pillars of the Chinese economy, and in recent years brands within the industry have thrived in both production and marketing. Overseas suppliers of packaging materials thus have enormous opportunities in the market, as the domestic industry is likely to expand precipitously over the foreseeable future. Packaging equipment in demand: • Case/carton preprint equipment • Die-cutter • Bronzing machine • UV varnish machine • Gluing machine • Cartoners • Packaging inspection equipment • Shrink film packaging machines • Case packers • Wrapping machine • Labelling and label printing machine • Palletising 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 40
    • China Intelligence Online www.chinaintelligenceonline.com • Reclaiming and recycling equipment for packaging Healthcare & Cosmetics: Most healthcare & cosmetics products depend on imported machinery, with filling machines made in China sharing a small piece of market. In future packaging machinery featuring precise measurement, continuous- motion linked or integrated complete production line will be in great demand. Domestic filling machines comprise a small portion of the healthcare and cosmetics product market, leading to a dependence on imported machinery. A future trend in the industry is demand for precise measurement, continuous-motion, and integrated complete production lines. Demand: • Demand changes are mainly represented by varied demand for the filling machine in the healthcare and cosmetics industry • Precise measurement • High-speed and high automation • Within the next few years, continuous-motion linked or integrated complete production lines are to be introduced Dairy: The dairy industry, which has developed markedly in recent years, has spawned notable demand for multi- stuff yoghurt packaging, such as ‘cup-in-cup’ packages for oatmeal and nuts, as well as small paper cluster packaging. Demand: • New products raise new requirements on integrated filling machines. For example, in 2004 Shanghai Bright Dairy & Food launched a fruit yoghurt product mixed with big fruit granules with the diagonal length of the granules ranging from 12 to 21 mm. At present, only foreign manufacturers can provide them with completely automatic fillers for this type of yoghurt production. • The appearance of new packaging forms inspired higher requirements for filling machine automation and packaging containers. For example, some large dairy enterprises such as Beijing Sanyuan launched milk in plastic barrels in succession. Therefore, demand for higher automatic filling machines and suppliers who can produce more packaging barrels increased. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 41
    • China Intelligence Online www.chinaintelligenceonline.com Food Statistics from the National Bureau of Statistics of China reveal that the food industry has grown even faster than the national economy as a whole. In 2004, food sales income reached CNY 900bn, while analysts project a continued 10% growth rate. Demand: • An instant food production line integrating processing and packaging • Vegetable and fruit processing and fresh-keeping equipment Beverage: The Chinese beverage industry registered a gross output of 22.6 mn tonnes in 2005, a number projected to increase to 37mn tonnes by 2015. This growth has been spurred by the rise of packaging, filling, labelling, and coding technologies. Demand: • Blowing-filling-sealing (BFS) • Aseptic cold filling Pharmaceutical: In 2004 the Chinese pharmaceutical industry exceeded over CNY 35bn in output, an increase of 17.05% from 2003. Packaging within the pharmaceutical industry, however, lags behind development of the industry itself. Nevertheless, opportunities remain promising. Demand: • Complete production line integrating blister packing, cartoning, shrink-wrapping, case packing, and sealing • Versatile blister packaging machinery • Automatic capsule filler • Multi-lane bagging machinery • BFS (blowing-filling-sealing) 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 42
    • China Intelligence Online www.chinaintelligenceonline.com • On-line inspection equipment • Coding equipment 6.7 Industrial packaging zones The coastal provinces in China are by far the most developed in the country. Within this area, the three main industrial packaging zones are located in the Pearl River Delta including Hong Kong and Guangdong Province, the Yangtze River Delta centred around Shanghai, and the Beijing-Tianjin Bohai Rim, which also includes part of Hebei Shandong province. 6.8 Local sourcing Due to its underdeveloped domestic paper products and plastic raw materials manufacturing industry, China depends heavily on overseas suppliers, particularly in regards to high-quality products. According to recent reports, China’s enormous demand for raw materials has led to price pressures on recyclable goods in distant Europe. One report stated that the large numbers of freight and cargo ships delivering Chinese goods to Europe are filled with waste on their way back. As a result, some European recycling firms are going out of business and more than 33% of the waste paper and plastic collected by British local authorities, supermarkets, and businesses are arriving in China. The price fluctuations of imported raw materials, however, have caused a local sourcing trend. In 2002, the price of waste paper in the US rose by 50%, while the prelude to the Iraq War caused a spike in the plastic resin and raw material prices by 30%. In response, the Chinese government is encouraging foreign investment in establishing domestic paper production supplies; a move the government hopes will reduce vulnerability to price fluctuations. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 43
    • China Intelligence Online www.chinaintelligenceonline.com 7 Disclaimer To the best of our knowledge, the information contained in this report is accurate. However, China Intelligence Online is not responsible for actions taken based on information herein. Readers are urged to exercise due diligence before any business arrangement. 中 国 包 装 China Packaging Industry 2006 | Informing Business in China 44