Early this year, China announced that its economy grew by slightly less than 7% in 2015. Economic growth is on track to be even lower in 2016.
Compared with the 8-10% growth China enjoyed in the 15 years prior, the figures are low, but for the chemical industry, the country remains a land of opportunities. “If you are close to the customers, you can achieve growth in China,” says Stephan Kothrade, president of BASF Greater China (meaning China and Taiwan).
At paints and coatings producer PPG Industries, Mike Horton, head of Asia-Pacific operations, points out that the Chinese economy is unevenly affected by the slowdown. “Of course, if you try to sell to the state-owned steel industry, that sector feels a big impact,” he says. Another struggling industry is shipbuilding, to which PPG sells marine coatings. A slowdown in international trade is the main cause, he says.
But PPG, Horton says, has managed to grow in China faster than the country’s GDP by profiting from sectors such as auto manufacturing. Chinese carmakers, he observes, are particularly keen to buy PPG’s premium grades of coatings. “The finish and color of the car is the first thing that a buyer sees,” he notes.
BASF’s Kothrade concurs that the automotive sector is a bright spot. The German firm has developed new emissions catalysts for the country as well as odor-free foams that can be used in car interiors. Unlike in the West, he notes, Chinese buyers don’t like that new car smell.
Besides automotive, Kothrade notes, the Chinese personal care industry offers opportunities for chemical makers able to customize products. BASF, he says, was able to support the Chinese company Blue Moon in developing a highly concentrated detergent that works well on whites.
David Jiang, president of the chemical market consulting firm Sinodata Consulting, says the main problem for the chemical industry in China is that local producers have overinvested in commodities, leading to a glut of certain products. But Chinese demand for chemicals remains strong, particularly for use in packaging, he notes.
China’s lower GDP growth needs to be put in perspective, Kothrade adds. Even at the current rate, he says, the Chinese economy grows by the equivalent of one whole Sweden every year.