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Opinion: Plastics companies react to China's 'new normal'

Don Loepp | PLASTICS NEWS

A week in China last month had me a little confused. But the problem wasn't jet lag.

What had me scratching my head was all the discussion at Chinaplas 2015 about China's "new normal" -- the government's term for a soft landing to an economy that's been growing at a double-digit pace for more than 30 years.

First, some background.

China in 2015 looks a lot different from what it was when the economic boom started in 1978. I wouldn't call it a completely capitalist economy -- there are still plenty of state-owned enterprises, even in plastics. But China has enthusiastically embraced the free market, and Guangzhou, the host city for this year's Chinaplas, offers examples everywhere.

Chinaplas 2015 was the 29th annual show. The first, in 1983, was held in Beijing -- a political and diplomatic center, but not really a business powerhouse -- and it was primarily about introducing Western technology to China's nascent plastics industry.

Now the show alternates each year between the commercial hubs of Shanghai and Guangzhou. Chinaplas today is one of the world's two largest plastics shows -- the other is Germany's K show, which is held every three years.

  Loepp

The 2015 Chinaplas show had 3,282 exhibitors -- slightly more than K 2013's 3,215 -- and 240,000 square meters of exhibition space, slightly lower than K 2013, which had 270,000 square meters. Attendance numbers are harder to compare, because all trade shows seem to count visitors differently, but Chinaplas' totals are nothing to sneeze at: 128,264 in just four days, including 35,090 (or about 27 percent) from outside China.

While Western technology is still very important at Chinaplas, it's also a showcase for Chinese-made machinery, tooling and materials.

Good news? It's all relative.

And that brings me to my confusion about the "new normal."

There are a lot of different perspectives to the slowdown in China's GDP growth. But I noticed at Chinaplas that no one considered it bad news.

First, there were the realists. Plenty of people told us that 7.4 or 7.5 percent annual economic growth is still absolutely great, and they'd be jumping for joy to see that kind of GDP expansion anywhere else. Plus, they expect the plastics industry will outperform GDP anyway, perhaps by as much as 50 percent.

Next, there were the pragmatists. They believe China couldn't possibly keep up double-digit growth forever, especially with the wage inflation the country is seeing in the heavily industrialized coastal cities. High wages and high energy costs already are eroding growth, sending low-wage work to places like Vietnam, and making manufacturing in North America and Europe more competitive with China again. So the pragmatists believe a slowdown in China was inevitable.

Finally, there are the optimists. And if anything, those people were the majority. They think the slowdown will actually be good for their business. If China isn't just pursuing unrestrained growth, they say, it will put more emphasis on higher quality products and sustainable economic expansion. And that's good for the types of companies that we typically talk to at Chinaplas, the higher end machinery, materials, tooling and auxiliary equipment companies.

That was more or less the official storyline at Chinaplas -- it was all about China's domestic plastics industry's focus on higher quality, improved technology, automation and environmental sustainability.

Is China becoming a mature market? In many ways, it already has. Right now leading suppliers from the West, Japan, South Korea and Taiwan are hoping to capitalize on China's investment in improved technology and materials.

But so are domestic Chinese suppliers, who are stepping up their game because they see the same trends unfolding.

No doubt there's plenty more growth coming to China's plastics market -- which already is the world's largest. But I suspect that if any country can engineer an economic soft landing, it would be China, where the government still has significant control of the economy, and (perhaps more importantly) the economic data.

Loepp is editor of Plastics News and author of "The Plastics Blog." Follow him on Twitter @donloepp.

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