Coatings World - June 2009

tional companies are expected to strengthen their competitiveness through mergers and acquisitions (M&A), improving distribution channels and increasing their production capability. The Chinese coatings market is overdue for significant rationalization and integration. The economic slowdown may prove to be the catalyst to speed up this process.

individual income tax in a bid to stimulate investment and consumption. In November 2008, the central government embarked on an RMB4trillion stimulus plan, which consisted of massive infrastructure construction and further financial policy adjustments. The program involves housing, highway, railway, rural infrastructure, health and education and post-disaster reconstruction in Sichuan Province. If these measures are proven to be effective, China’s macro economy is expected to maintain annual growth of approximately eight percent in the next two years. Of course this projection assumes a gradual recovery of the economies of the U.S. and EU. China’s paint and coatings enterprises will find tremendous opportunities in the economic recovery process that has

been defined. The extent of the negative impact from the global economic slowdown will be mitigated by the increasing domestic coating demand in the next three years.

If you wish to participate in the global paint and coatings market you do need to have a substantial presence in the Chinese market. Now may be the best time in recent years to move in that direction. CW

SUMMARY

The global economic slowdown, ignited mostly by the subprime mortgage crisis in the U.S., has impacted the Chinese economy. The result has been lower levels of exports and foreign direct investment inside China. All of this has given rise to a much larger unemployment rate increase than China has seen in the past few decades. Although there are no reliable government statistics available, it is possible that the real unemployment rate in China is already in the double-digit range. Remarkably, the global slowdown has so far not brought much impact to Chinese commercial banks, investment banks and other financial institutions, nor did it greatly affect China’s domestic demand. In all, the slowdown has a genuine negative impact over the Chinese economy, which they believe will be short term in nature. Most likely the rate of improvement will be tied to how quickly and how large of a recovery will be made by the U.S. and EU countries. China also has an appetite for imported crude oil, hence the government’s commitment to producing an all-electric car. However, if OPEC is correct in that we will see crude oil topping $75/barrel by midsummer this could in fact delay or make worse any planned recovery by the Chinese or other countries that would be potential export customers of China.

China has made a series of tactical and strategic moves to maintain its economic growth, including the reduction of enterprise value added tax and

About the author: Dan Watson is vice president of Chemark Consulting’s Far East operation and specialist in acrylic systems globally. He is the author of Chemark’s Coatings Highlights and served for more than 28 years in the Far East for Rohm & Haas.

Key trends influencing China’s coatings industry

• The rapid construction of Shanghai 2010 Expo sites and buildings is going on at full speed preparing for the grand opening in May 2010. The repainting of the outsides of all the elevated roads in Shanghai in preparation of the 2010 Expo will take a large quantity of exterior coating.

• The seven subways presently under construction in Shanghai will have to be up and in operation by the opening of the 2010 Expo, which will require a tremendous volume of paint.

• The saving/income rate in China has traditionally been much higher than that of the Western countries especially the U.S. With the economic down turn, China’s general public still have some money to spend on consumer goods, including paint.

• The slow down of new housing construction has really hurt China’s architectural coating business. Nevertheless, the exterior repaining of old apartment buildings subsidized by many big cities such as Shanghai is helping the exterior paint sector. Beijing is also allocating money for the refurbishment of such buildings.