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Review and Vision of China Plastics Processing Industry

In 2019, in the face of significantly increased risks and challenges at home and beyond, the plastics processing industry adhered to the new development concept, took the supply-side structural reform as its main line and technological innovation as its driving force, accelerated structural adjustment, and bolstered continuous and steady growth of the industry, presenting a stable and progressive situation in the economic performance. At the beginning of 2020, China was affected by the Covid-19 epidemic. Relevant analyses indicated China’s economy in the short term would have a significant decline, but the basic trend of steady and robust development and long-term improvement has not changed.

Review of 2019

I. Steady growth

1. Continued growth in key economic indicators

According to the summary statistics of national plastic products industry from January to December 2019, enterprises completed a total output of 81,841,700 tons, an increase of 3.91%; the operating revenue of 15,835 enterprises above designated size amounted to 1,907.748 billion yuan, up by 2.77% year-on-year, making up 1.8% of the national total. They achieved a profit of 105.452 billion yuan, or 12.68%, accounting for 1.7% of the national total, with a profit margin of 5.53% on the operating revenue. According to preliminary estimates, the accumulated export value of plastic products from January to December 2019 was US$74.933 billion, up 7.94% year-on-year. Key economic indicators of the industry continue to grow. 

2. Steady growth and large increase in profits

In 2019, under the synergy of technological progress, structural optimization, stable raw material prices, the national policy of reducing fees and taxes, machine-to-human replacement for cutting labor costs, and the scale advantage of large enterprises, the total profit of the plastics processing industry gained a large increase of 12.68% year-on-year. 

3. New results in structural adjustment

In 2019, the plastics processing industry achieved significant results in eliminating backward production capacity and accelerating product transformation and upgrading. The industry vigorously implemented measures such as the triple-pronged strategy, and gradually transformed itself towards a high-end, branding and greening model. For example, the battery separator industry expanded the capacity of high-end products; the plastic wiring equipment industry sped up the development and utilization of five high-end special materials for general plastics and the industrialization of modified composite plastics, special engineering plastics and alloy materials; the plastic additives industry conducted the structure adjustment for products; the rotational molding industry launched the first nylon rotational molding materials to replace imports, which have been applied in the fuel tanks of engineering machinery; some of high-end domestic polyester-film products have been able to replace imports, with the number of imports further reduced; the artificial and synthetic leather accelerated the elimination of backward production capacity, with the production of ecologically synthetic leather produced by water-based polyurethane and other eco-friendly materials increased; and the proportion of technology-based innovative products continued to increase, further promoting the structure adjustment and upgrading of the plastics industry.

4. Industry concentration is further increased

The number of above-scale enterprises in the plastics processing industry has been growing steadily, with 15,835 above-scale enterprises at the end of 2019, an increase of 264 or 1.7% from the end of the previous year. In the plastics processing industry, the leading enterprises with large scale and good overall quality have picked up their development pace and increased their number, with their comprehensive market competitiveness heightened. However, small-scale and low-tech enterprises have been confronted with difficulties in their development, some of which have stopped production or switched into other industries. A growing number of orders are won by large enterprises with strong strength, standardized management and excellent quality. The industry continues to show a trend that the strong are stronger and the weak are weaker. The allocation of resources has also been inclined to superior enterprises to further advance the optimization of industrial structure.

5. The overall innovation awareness of the industry has been raised

The industry as a whole is becoming more aware of innovation, with the market demand for high-end products growing. Technological innovation, process improvement and consumer upgrading continue in the industry. Enterprises have focused on innovation and transformation, equipment upgrading, machine-to-human replacement, labor reduction, cost reduction, and higher management efficiency, so as to boost the high-quality development.

II. Multiple measures for overcoming difficulties

In 2019, China’s plastics processing industry overcame the impact of adverse factors such as China-US trade frictions, structural oversupply of some products, strict environmental controls, and negative public opinion on plastic waste, and took multiple measures to resolve the difficulties and make continuous progress in the industry.

1. Actively responding to China-US trade friction and achieving steady export growth

Effective on May 10, 2019, the US increased tariffs to 25 percent on US$200 billion in imports from China that were originally subject to a 10 percent tariff. By the Chinese version of tariff code, there involved 36 tariff codes for plastic products, accounting for 60.45 percent of exports to the US in 2017. As the US is China’s largest exporter of plastic products, the tariff increase has a great impact on the industry’s exports. Enterprises in the industry responded positively, taking multiple measures to stabilize exports. Thanks to the industry’s concerted efforts, exports to the US in 2019 declined slightly, but overall exports increased significantly.

2. Vigorously advancing ecological conservation and green development

In early 2019, the General Office of Hainan Provincial Party Committee and the General Office of Hainan Provincial Government issued a statement announcing a total ban on the production, sale and use of disposable non-degradable plastic products in Hainan Province for a certain period. At the end of the year, the 16th meeting of the Standing Committee of the Sixth People’s Congress of Hainan Province adopted the Regulations on Banning Disposable Non-Degradable Plastic Products in the Hainan Special Economic Zone. Multiple countries and regions around the world have also proposed to prohibit the use of disposable plastic articles such as plastic bags. The issue of plastic pollution has received unprecedented attention, with negative reports in the media. In addition to calling for the proper use of plastics and science-based recycling and disposal of disposable plastic products, the industry has carried out a lot of positive and effective efforts in the development and use of biodegradable materials, reduction of disposable plastic products and carbon emissions, and more recycling of waste plastics.

China Plastics Processing Industry Association (CPPA) hosted the “Sub-Forum on Ecological Construction of Plastics” of “Engineering Technology Forum on Sustainable Development of Polymers” under China Engineering Science and Technology Forum, and held the “Plastics Greening and Green Technology Innovation System.” In addition, it held a series of activities to promote the “ of the China-Japan Symposium on Marine Plastic Pollution Response.” Through similar related activities, the Association actively led and bolstered the prevention and control of plastic scrap and the ecological disposal of plastics, advocated that all sectors of society should reduce the generation of plastic scrap from production, application and recycling, and called on the public to raise their awareness of the plastic scrap pollution and the media to report this issue in a science-based manner.

3. Expanding new application fields and creating new demand

In 2019, the industry was aggressively expanding into new applications, and creating new demand and new economic growth opportunities. Against the backdrop of the downturn in the real estate industry,  the “Belt and Road,” sponge city, underground pipe network and integrated pipeline corridor in smart cities, clean energy use, assembled buildings, cleaning of black malodorous water bodies, rural water conservancy, and rural habitat improvement should be put in place in a bid to gain new market space, which are promoted and influenced by relevant national policies in the plastic pipeline industry. Despite the sluggish application market of EPS wall insulation panels, enterprises are proactively exploring innovative applications such as integrated plates, floor heating boards and acoustic insulation panels, yielding good results. Automotive production and sales decreased in 2019, with the overall use of rigid and flexible polyurethane foam for automotive (excluding refrigerated vehicles) declining year-on-year accordingly. Still, enterprises are aggressively exploring new polyurethane markets, gaining growth in other application fields. Despite the lack of market demand, businesses are still actively developing new uses in the artificial and synthetic leather industry and turning high-end synthetic leather such as eco-friendly and fashionable one into the mainstream product of the market.

4. Promoting the intelligent process, reducing costs and enhancing quality

Plastic processing costs, especially labor costs, are on the increase, further highlighting the lack of skilled labor and recruitment difficulties. To reduce labor costs, improve product quality, and create greater profit margins, the plastic processing industry is promoting machine-to-human replacement, switching from the labor-intensive to technology innovation model. For example, the plastic wiring equipment industry has gradually realized the automation of production, powder, feeding and other equipment. The artificial and synthetic leather industry has consciously adopted and practiced intelligent manufacturing, showing new growth points. Enterprises producing plastic household goods have learned the model of “almost unmanned intelligent injection molding workshop” to improve the intelligent manufacturing.

Vision 2020

I. Industrial restructuring will continue to gain momentum

In 2020, with the further improvement of industry concentration, the polarization will continue. The market share and benefit growth will be further concentrated among advantageous enterprises and new industries.

II. Product export and capacity output will be coordinated

On January 15, China and the United States signed the phase-I economic and trade agreement (ETA), in which the US cancelled tariffs scheduled to take effect in December and reduced to 7.5% the tariffs already imposed on US$120 billion of Chinese goods on September 1. While the signing of the ETA prevented the continued escalation of trade friction between the two sides in 2020, the 25 percent tariff on US$250 billion worth of Chinese goods remains unchanged, with difficulties still in exports to the US. The plastic products industry should aim at international emerging markets, carry out extensive international cooperation and diversified development, and promote plastic-related industries to expand their market space from product exports to capacity output.

III. The triple-pronged strategy needs to be implemented in a more in-depth manner

With the socio-economic development, the downstream requirements of suppliers have become increasingly standardized, forcing enterprises to standardize their production and implement the triple-pronged strategy of increasing varieties, improving quality and creating brands. In the future, the industry should adapt itself to the high-end, personalized, small-batch and privately-tailored market orientation, bolster the rapid growth of new production models and business forms, and vigorously foster new economic growth points. Industry players are also strengthening collaborative innovation along the industrial chain to develop new materials and improve product performance. By improving quality, increasing varieties, creating brands, we need to promote the spirit of craftsmanship, advocate high-quality manufacturing, and transform and upgrade the industry to achieve the shift from large to strong.

4. The ecological conservation and green sustainable development across the industry need to be advanced at a faster pace

The tenth meeting of the Central Committee for Comprehensively Deepening Reform held on September 9, 2019, adopted the “Opinions on Further Strengthening the Control of Plastic Pollution.” The meeting stated that we should actively deal with plastic pollution, firmly establish the new development concept, orderly ban and restrict the production, sale and use of some plastic products, promote recyclable and biodegradable alternative products, increase the supply of green products, regulate the recycling of plastic waste, improve the management system of all aspects, and conduct strong, orderly and effective control of plastic pollution. The active engagement of workers in the plastics industry makes a difference. Looking ahead to 2020, the ecological conservation and green sustainable development of the industry will be advanced at a faster pace. All production sectors should improve industry self-discipline, adhere to green production, and reduce the disorderly discarding of plastic particles and finished products from the production, transportation, sales and other aspects of plastic products. We should advocate the society to use plastic products in a scientific and reasonable way, facilitate the reuse and recycling of plastic products and packaging; the recycling industry should actively and scientifically promote the garbage classification system, refine the way of plastic garbage collection and disposal, strengthen the reuse and recycling of waste plastics, conduct the scientific and systematic management, and form a long-term mechanism.

V. Policies for reducing the impact of epidemic on the industry

During this Spring Festival, the outbreak of the Covid-19 epidemic in China caused a certain degree of impact on the production and operation of the plastics industry. In this context, the industry proactively responded to this situation. Currently, the impact on enterprises producing epidemic prevention-related goods is not large, while there is a greater impact on the production of other producers, mainly on enterprises’ work resumption, personnel, transportation, raw material supply, financial situation, and exports. Recently, relevant ministries and local governments have issued policies covering finance, taxation and human resources to encourage all industries to resume work and production and help resolve their difficulties so as to minimize the impact. The analysis of the impact is phased. With the improvement of the environment, the promotion of policies and the recovery of market, 2020 will mark one featuring steady and robust development and long-term improvement of the industry.

CPPA will continue to organize China’s plastics industry to study and implement the spirit of speeches of General Secretary Xi Jinping and the arrangements of the CPC Central Committee, follow the new development concept, deepen the supply-side structural reform, promote technological innovation, lead the industry along the direction of innovative development, implement the “triple-pronged” strategy, vigorously enhance the intelligent manufacturing, and boost the sustainable development of the plastics industry. It will host the 2020 China International Plastics Exhibition and the 4th Plastics Exhibition for New Materials, New Technologies, New Equipment and New Products, China Plastics Science and Technology Conference, and the 30th Asia Plastics Forum, and actively build a communication service platform for exchanges regarding science and technology, and economic and trade. It will conduct in-depth research, enhance coordination to reflect the effectiveness of solving enterprises’ difficulties, improve the service industry. Together with industry colleagues and firm confidence, it will work as a team, take multiple measures to win a double victory in the fight against the Covid-19 epidemic and ensuring the smooth operation of the economy, advance the high-quality development of China’s plastics industry, and contribute to a better life for the people!

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