Coatings World - August 2015

Asia Pacific
August 2015 www.coatingsworld.com Coatings World | 37

economic class of the so-called BRIC countries of Brazil, Russia, India and China. According to the McKinsey Global Institute, China will have more than 220 cities with populations greater than one million people by 2030, and more than 70 percent of the Chinese population will live in cities with more than one million people by 2025.

While not to detract from China’s impressive historical growth, there is no denying that there has been a recent slowdown in China’s GDP growth compared to past years. According to the official data released by the National Bureau of Statistics of China ( 21 October 2014), GDP growth for China in the third quarter of 2014 was the slowest growth since the first quarter of 2009, during the depths of the 2008 – 2009 Recession. The year-over-year growth for the third quarter of 2014, according to China’s National Bureau of Statistics, was 7. 3 percent.

The massive factory sector within China has slowed dramatically. Economists believe that China has too much manufacturing capacity to satisfy the current, anemic levels of global demand, which have still not been able to fully recover from the financial crisis. As China’s and Southeast Asia’s exports have fallen due to sluggish Western economies, so too has the GDP growth of their economies. While this occurred, there was a leveling off of middle class consumer demand across China which has resulted in thousands of layoffs and tepid sales of products for domestic consumption.

China’s GDP growth is still likely to do better than most other countries. Since the 2008 recession, China, India and many Southeast Asian countries have continued to grow much faster than the global average rate. This is in contrast to other countries in the region, such as Japan and Australia, whose economies have struggled since the 2008 – 2009 recession similar to many of the developed Western economies.

The expectation is that the disparity in growth rates will continue over the next several years. China and India are forecast to experience the greatest growth in GDP per capita to 2018.

Japan and Australia are projected to post positive growth but
will significantly lag China, India and other parts of Asia Pacific.

Economic Influences

Asia Pacific is influenced by a wide array of economic factors. Demand for decorative coatings is affected by new construction, housing activity and overall affluence. Housing and construction markets has continued to flourish, albeit at a more modest rate, in China, India and other parts of developing Asia Pacific. As an example, new construction spending in the United States and Western Europe since the 2008 – 2009 recession has still not reached pre-recession levels. Over this same period, construction spending in China, India and other Asia Pacific economies remains well above the global average. This trend in construction disparity is projected to continue over the near term.

At the most basic level, industrial coatings demand is a function of the production of end use OEM products such as automobiles, tractors, consumer electronics, furniture, packaging, etc. It is important not to forget that coatings have continued to get a boost from the investment in infrastructure development being made throughout Asia Pacific, particularly in India and China, including new bridges, landmark properties, alternative energy facilities, nuclear power generation, hospitals, schools, etc. Hosting world events such as the 2008 Olympics in Beijing, the 2010 Shanghai World Expo and the 2010 Guangzhou Asian Games has certainly continued to stimulate large infrastructure projects. Much has been made of the changes in the automobile market, with China supplanting the United States a few years ago as the largest car producer in the world. But the transition to the number one automobile market in the world is simply a microcosm of the shifting manufacturing landscape.

The expansion of the global shipping industry including certain coatings advances made in this sector will continue to grow the Asia Pacific marine coatings segment, already the largest in the world, at approximately 70 percent of the total global volume. Ship building, maintenance & repair of ships and overall sea trading have all declined in Europe and North America over the past two decades which has also helped to drive these activities to the lower wage rate countries such as China and South Korea. These factors will almost certainly secure Asia Pacific’s leading position in marine coatings for the next decade or more.

The overall trends in construction and manufacturing are apparent in the GDP data of the various regions. The data suggests that Asia Pacific grew faster than North America and Europe prior to the recession and significantly outperformed Western Economies during the recession. Furthermore, recent data from the International Monetary Fund, World Economic Outlook indicates that despite the slowdown in the Chinese economy as discussed above, the disparity in growth is even greater in the post-recession period than it was in the pre-recession period.

This report was based on information from the “Global Paint & Coatings Industry Market Analysis” report published by management consulting firm, Orr and Boss. For more information on this report go to www.orrandboss.com.