Asia Pacific Report
CHINA
Amid its economic boom, China has become
the world”s second largest paint producer.
BYTIMWRIGHT
EDITOR
China’s economic growth continues to be a remarkable story. The growth of China’s coatings industry
also continues to be a major success. Coatings output increased from 2.98 million tons in 2004 to 3.82 million
tons in 2005, while sales revenue rose by 21.84% to $9.14
billion in 2005. Total profit reached $550 million, a rise of
19% over the previous year.
The world’s top ten coatings companies now have at least
one manufacturing base in China, while the presence of
innumerable joint ventures for raw material products are
providing support to the industry.
As the world’s business community watches China’s miraculous growth, the Chinese coatings industry has, meanwhile,
achieved remarkable growth. One important driver is the continuing shift of industrial manufacturing of consumer goods
from Western Europe and the U.S. to China, including manufacture of IT, domestic appliances, furniture and automotives.
The need for coatings in China is clear. After all, the country
is undergoing the world’s largest construction boom. The 2008
Beijing Olympics this summer, plus the 2010 World Expo, to be
held in Shanghai, and the 2010 Asia Games to be held in
Guangzhou, will showcase China to the world, and have led to
massive investment in urban infrastructure. It is anticipated
that the Beijing Olympics is expected to spend $4 billion for
coating and allied products.
In addition, home ownership has seen explosive growth
since the closure of the government backed welfare housing
scheme in 1998, and the real estate market is officially estimated to maintain its current growth rate of ten percent
over the next five years.
“We have witnessed a strong migration of the industrial
business base to the lower labor regions of the world,” said
Terry Francek, business unit controller for Akzo Nobel’s
industrial finishes business unit.
The Chinese automotive coatings market is expanding in
the wake of larger investments in car manufacturing
plants. Car production is growing four times faster than
the rest of the world, while all major multinational produc-cers of automotive coatings are active in the country, supplying leading international automobile manufacturers.
PAINT MAKERS CONTINUE TO INVEST IN CHINA
The vast majority of the investment in both acquisition and
capital investment in the coatings industry is flowing into
China. In the period 2005-2007 there were 43 investments
in added plant and equipment capital among paint manufacturers, according to the Chemark Consulting Group. For
this period a total of 880,600 tons per year of annual capacity capital was added. Of that total, 76.2% was invested in
China, Chemark said.
In terms of mergers and acquisitions, clearly there has
been increasing activity in the emerging markets, especially
China. Chemark reports that there are approximately 8,000
paint companies in China and local consolidation will play a
major role in improving the ability of the market to compete
in the future. The Chinese market is expected to grow 63%
to $12 billion by 2010, a rate that exceeds 12% per year,
Chemark said. Architectural coatings will be the fastest
growing area due to the billions of dollars being invested by
the Chinese government in infrastructure and housing.
Consolidation in China, combined with double digit
annual growth, will probably create one to two global competitors by 2012, the firm said.
Akzo Nobel, the world’s largest paint and coatings company has been extremely bullish on China. Last year,
Akzo’s CEO Hans Wijers announced new strategic targets
for China, outlining the company’s goal to achieve revenues
totaling $2 billion by 2012.
Rapid expansion in recent years has seen the company
significantly increase its presence and its sales in China,
and the chairman—who expects 20% of revenues to originate from the Asia-Pacific region by 2012—expressed con-
