China Report
October 2014 www.coatingsworld.com Coatings World | 51
industry (i.e. raw material or formulated coatings supplier).
China has become the world’s largest producer and consumer
of coatings. As the paint, coatings, adhesives and sealants industries continue to grow in China, leading foreign companies
will continue to invest heavily in this region.
However, it’s fairly important to point out that China’s
leaders want to reduce the economy’s reliance on foreign in-
vestment, while expanding household consumption, which
now accounts for around 35 percent of the economy, about
one-half the 70 percent rate in the U.S. Beijing wants to unlock
the power of the middle class to consume. Unfortunately, there
is still not a lot of evidence China is making that economic
transition. Fixed asset investment, for example, still appears
to be the main economic driver. The so called ‘mini-stimulus,’
which involved ramping up public spending on railway, energy
and infrastructure projects, did in fact drive a sharp accelera-
tion in steel output, and also supported cement and metals
production. The central bank also eased monetary conditions.
To most China observers it appears the Chinese government
has reverted back to the old investment playbook. The con-
sumer sector is important to the future of China, but today
it’s too small and growing too slowly to be a key driver of the
broader economy. Looking ahead, the Key Issues in China for
International Investors seem to be:
• Deregulation of Interest Rates
• Liberalization of the Currency
• Improving Market access for foreign companies
• wLess tension between Beijing and various mainland sites
(i.e. Hong Kong).
Bottom line, all financial investments contain an element of
risk. Investing in China or any other foreign location simply
adds more elements of risk that needs to be analyzed and managed accordingly. This writer still views China as an opportunity but not for the faint hearted. CW
