manufacturing PMI remains unchanged at 50.2. This does not
mean all manufacturing is growing slowly, just the industry as
a whole. Growth areas in the manufacturing industry for sealants include telecommunication, which grew by 11. 8 percent
in 2014, electronic manufacturing grew by 12.2 percent, and
consumer goods increased 8. 4 percent.
Transportation is the fourth largest end-user industry by revenue for sealant products. China is seeing national investment
in high-speed railways and other track projects. The recently announced Beijing-Tianjin-Hebei railway construction project valued
at RMB 100 Bn is one of many new railway projects being under-taken by China. Total capital invested into railway construction for
January-April 2015 increased by 22 percent year-on-year. Another
major project is the ‘New Silk Road’ a plan to connect China with
neighbors near and far by rail and sea trade routes. This will mean
an increase in train car and ship production, both of which make
use of sealant products. Even though government investment plan
is less predictive in the past, in facing the slower GDP growth,
Chinese government are more likely to invest in infrastructure and
transportation projects to avoid an economy hard landing.
The electronics assembly industry refers to electric power compo-
nents, PV panels, and LEDs. According to GCiS’s analysis, the elec-
tronics assembly industry was the fastest growing end-user industry.
Based on government statistics, output for LEDs grew by 30 percent
in 2014 due to government energy saving initiative and support of
the LED industry. Other drivers of the electronic assembly industry
include electronic PCB, which saw sales increase by 8. 7 percent last
year, and the PV industry which saw sales increase by 18 percent.
Opportunities
The first response may well be to switch to producing different
types of sealant products, like polyurethane or acrylic sealants.
This is a good strategy for polyurethane sealants, but acrylic
sealants have stagnant growth and small market size.
Another option is to look outside the construction industry
for growth. It is also worth bearing in mind: these options are
not mutually exclusive. A company could change end-user industry, as well as sealant product. Fortunately, GCiS predicts
high growth in several industries in the next few years. These are
likely to enjoy growth beyond the short term, due to the “Made
in China 2025” policy.
Issued by the State Council, it focuses on the development
of 10 major industries which will be vital to transform China
into a manufacturing superpower. Relevant industries to sealant suppliers are: aerospace equipment, high-tech ships, railway
equipment, and new energy vehicles. Although this may cause
some protectionist measures in manufacturing industries, upstream suppliers should be unaffected. This policy also priori-tizes green products and high quality, both of which align with
foreign companies’ products. CW
