China is the world's fastest-growing economy, has the biggest
population, is the largest exporter of fast-moving consumer goods
(FMCG), is the cheapest manufacturing centre and is the largest
recipient of foreign direct investment. In order to support China's
industrial growth, the country is developing the world's largest
At the end of 2003, China had 38,000 packaging manufacturing
plants, employing more than three million people, and contributed 2
per cent to gross domestic product (GDP). The country is the single
largest importer of raw materials for packaging, including
significant shipments of paper, pulp, recovered paper, roundwood
chip, aluminium, polymer resins and other materials. Before the end
of the decade, China's gross packaging product output is forecast to
increase by around 80 per cent in value terms.
According to China Packaging Technology Association (CPTA), the
central supervisory and support authority for the industry, China
has 34,578 packaging enterprises, of which more than 9,000 are
involved in the production of plastic packaging. Although there are
more companies operating in the plastics sector than in any other
packaging sector, in volume terms plastic packaging output is less
than half that of paper-based packaging, which accounted for over
half of all packaging output in 2003.
In 2002, China produced a total of 14.1 million tonnes of plastic
products, representing an increase of almost 14 per cent on 2001. By
product type, output of plastic films was 3.07 million tonnes, up 11
per cent on 2001; foam 0.67 million tonnes, 7 per cent; plastic
packaging containers 0.51 million tonnes, up 24 per cent; plastic
sheets 0.82 million tonnes, up 19 per cent; and plastic filament and
wovens 1.59 million tonnes, up 10 per cent. Out of China's overall
plastic production capacity, packaging materials accounted for
approximately 18 per cent of the total in 2002, and was actually the
fastest-growing sector in the plastic processing industry during the
The market for plastic packaging
China's paper industry dominated the packaging sector in 2003,
when considered by packaging material volume consumption, accounting
for 52 per cent of all packaging consumed ahead of glass (17 per
cent), plastic (23 per cent) and metal (less than 8 per cent). The
reliance on paper-based packaging is entirely due to the historical
combination of domestic material availability versus foreign
currency expenditure required to import alternative materials,
coupled with need to prioritise the needs of other industries for
the same materials (plastic sheeting for agriculture, or aluminium
for building and construction).
Plastic packaging has experienced continuous growth since 1995.
Since the introduction of the tenth five-year plan, growth rates
across all forms of plastic packaging have consistently led GDP
growth by around 3 per cent annually.
In 2003, demand for plastic packaging containers reached 2.25
million tonnes, while demand for film (of all types) reached 6.4
million tonnes. Demand for containers and films are forecast to
reach to 5.44 million tonnes and 11.92 million tonnes respectively
by 2008. However, it must be noted that China's agricultural sector
will requisition more than 55 per cent of film production on an
ongoing year basis.
Production of key plastic packaging materials hit 4.07 million
tonnes in 2002, a rise of 12.4 per cent compared to 3.62 million
tonnes in 2001. The major substrate film materials used in China's
composite flexible packaging sector include PET, BOPP, polyethylene,
cast polypropylene (CPP), aluminium and vacuum-metallised PET
(VMPET) and CPP (VMCPP). Production of these materials is sufficient
to meet domestic demand, allowing some excess for exports.
Plastic packaging machinery
China's packaging machinery sector since 2000 has experienced
growth in excess of 10 per cent annually, offering opportunities for
both domestic manufacturers and overseas equipment vendors.
A key reason behind the $2.94 billion investment in plastic
manufacturing equipment in China during 2003 stems from the
recognition - since the end of the ninth five-year plan - that in
certain applications, plastic offers a more cost-efficient packaging
option than other materials. Additionally, liberalisation of
industry as a whole has resulted in the emergence of many very small
operations being established at very low cost, involved in the
production of a single line in extremely high quantities.
More than 91 per cent of the plastic packaging equipment
installed base is imported - however, with the heavy reliance on
reverse engineering, many of the more basic equipment functions will
be produced domestically. High-tech complex foreign equipment that
is hard to replicate will continue to be in demand.
China has a healthy domestic plastic equipment manufacturing
sector with more than 600 companies producing extrusion, blow
moulding and injection equipment with a total production value in
2003 of $1.43 billion, which represented actual sales of $1.50
billion. However, it is a reflection of the state-managed system
with the emphasis on 'production' versus 'profit', that sales of
$1.50 billion only returned profits of $164 million.
China is a market that cannot be easily ignored by material
suppliers, converters, equipment and consumables vendors. It is a
market that contains both opportunities and dangers, particularly
for foreign companies approaching the market with a collection of
preconceived notions about industry structures and decision-making
processes. In addition, it is also important to understand how the
size of the market is calculated, and also what the notion of
'profit' is as understood by Chinese companies. It needs to be
stressed, for instance, that when considering packaging 'value' in
the context of Chinese data, official figures do not represent
commercial reality, rather they are a 'transfer' (or subsidised
price) between related entities.
Many of the structures and systems in China are a legacy of the
Maoist era. Although a rapid transition is occurring across the
entire social and industrial fabric of China, many legacy systems
are still in place. Most of these are alien to western corporate
business culture - in order to explain the dynamics of the industry
it is often necessary to place them in a cultural context.
Nevertheless, it is clear that the Chinese market offers
significant potential for both plastic packaging companies and
machinery suppliers. The Chinese Government, however, will continue
to represent the main source of funding for expansion of the
Article Selected from <Plastic Packaging in China> by Mr