30 years of development history of China's paper packaging industry (part 2)

After joining the WTO, China has become a veritable "world factory" with its annual GDP growth rate maintained at double digits, and its growth rate ranks first among all major economic powers. China's total foreign trade has continued to grow substantially, and in 2013 it surpassed the United States to become the largest country in trade in goods, and has maintained its status as the world's largest exporter and second largest importer.

The prosperity of the manufacturing industry has further promoted the development of the packaging industry. The first decade of the 21st century can be said to be the most dynamic era of China's paper packaging industry. In 2003, after fierce competition with India and Japan, the first global industrial center established by an international organization in my country-World Packaging Organization Asia Packaging Center settled in Hangzhou, China.

In developed countries, the paper industry is no longer a "growth" industry, and some have even reached a state of sluggishness. China's entry into the WTO has given them new hope for growth. In this most attractive market, foreign packaging giants have entered in the form of sole proprietorship or joint ventures.

From the perspective of investment intensity, the major giants are full of expectations for the Chinese mainland market. In 2005, International Paper's Asian headquarters moved from Hong Kong to Shanghai, and announced a US$2 billion investment plan, which pushed overseas paper and packaging companies into China to a climax. In addition, Stora Enso, Oji Paper, WestRock …Most of the top ten international companies have invested or set up factories in China. The top three packaging companies in Taiwan have also placed more emphasis on the mainland market. So far, they still have advantages in certain subdivisions of paper packaging. The employees from these companies are still the backbone of the packaging industry.

However, the good times did not last long. In 2008, the subprime mortgage crisis in the United States came. The once powerful foreign-funded enterprises began to decline, and the protagonist of China's paper packaging industry changed again.

A local packaging company emerging from competition

In the huge investment wave of foreign companies, local paper and packaging companies have not been defeated by the influx of foreign giants, but have continued to learn and grow, develop and expand, which has established the current market structure of China's paper packaging industry.

Domestic companies have sprung up. In 2000, Chenming's A shares were listed. In 2001, Shanying Paper was listed on the Shanghai Stock Exchange. On September 26, 2003, Lee & Man Paper Co., Ltd. was listed on the main board of Hong Kong. Successfully listed on the Shenzhen Stock Exchange. On March 3 of the same year, Nine Dragons Paper was successfully listed on the main board of the Hong Kong Stock Exchange. Zhang Yin ranked first with a net worth of 27 billion yuan and became the first richest woman in China.

A company’s listing can raise a lot of funds, and there are also opportunities for refinancing after listing, thus providing a source of funds for the further development of the company. China's current leading paper-making companies are all listed in the first decade of the 21st century. With the help of a large amount of funds raised in the capital market, China's local packaging companies are expanding rapidly.

Foreign-funded enterprises quickly found themselves in a market environment with oversupply and more fierce competition, struggling with declining average market prices and excessive production costs. They have not been able to find a way to reverse the situation. They have been able to deal with the market in terms of product and capacity strategies. Changes in demand and adjustments are extremely limited.

Beginning in 2008, foreign-funded enterprises entered a period of low-speed growth and began to withdraw from the mainland market. In 2015, International Paper announced its withdrawal from the joint venture with Sun Paper; in 2016, International Paper's packaging business in Asia was taken over by Hexing, and 18 factories made Hexing rich overnight.

At the same time, in the downstream of the industry, leading companies such as Yutong, Meiyingsen, and Wangying also took advantage of the trend and entered a period of intensive listing. At the same time that foreign-funded companies in Europe and the United States retreated, local packaging companies began to rise.

It is worth mentioning that, whether it is papermaking or packaging, local Chinese companies can be said to be stepping on the shoulders of giants. They make full use of the abundant funds obtained in the capital market, or horizontally or vertically carry out a nationwide strategic layout. Regardless of whether it is diversified operations or mergers and acquisitions, it can expand its business scope and actively compete with foreign-funded enterprises in all aspects. The subprime mortgage crisis can only be said to be the largest of many sudden variables. The most fundamental reason is the overlap of ecological locations. Under the fierce competition, European and American companies have not chosen to die (of course, it is not necessary).

The second retreat and the establishment of a new packaging layout

By the beginning of 2016, International Paper had basically completed its strategy to withdraw from the mainland, followed by the “retreat” of Taiwan-funded paper packaging companies.

As introduced in the previous article, Taiwan-funded paper packaging companies were initially established to meet export packaging needs. As the Sino-US trade war detonated a wave of enterprise migration and prompted Taiwanese businessmen to return, the production bases of Taiwan-funded paper and packaging companies have increased their investment in Southeast Asia.

Take Taiwan's largest paper company Zhenglong as an example. Under continuous operating losses, Zhenglong quickly adjusted its investment strategy, shutting down and transferring multiple factories to enter the Southeast Asian market. On May 23, 2017, Shanghai Zhonglong Paper, a subsidiary of Zhenglong Group, issued an announcement stating that it will cease its paper production business and sell related papermaking equipment at the end of 2017. The following news is that Zhenglong has moved the 450,000-tonne packaging paper machine and supporting equipment of Shanghai Zhonglong Paper, which has been discontinued, to Vietnam for production.

Yongfengyu is also optimistic about Vietnam, building two paper mills in North Vietnam, and four paper mills that have been put into production in South Vietnam, and there are plans to expand production. Eighty percent of the revenue comes from Rongcheng in the mainland market. It is expected to invest 7 billion yuan to expand Taiwan's production base in three stages. The planned annual production capacity will surpass Yongfengyu to become Taiwan's second largest paper company.

The top three Taiwanese-funded paper packaging companies have all made choices. The reason behind this is that in addition to the direct factor of Sino-US trade conflict, it is also the result of industrial chain transfer and competition in emerging markets in Southeast Asia. Due to the soaring labor costs in Mainland China, the transfer of labor-intensive industrial chains to Southeast Asia has accelerated, and the supporting paper packaging industry has also been transferred.

In addition, more than 20 years have passed, and many veteran Taiwan-funded enterprises are facing the problem of equipment renewal and even replacement of personnel-and this time coincides with the current time when my country’s manufacturing industry shifts from labor-intensive to technology-intensive. In the face of a new round of major capital investment needs, in the face of fierce competition, reduced profits, and expected export risks, Taiwanese-funded enterprises dare not update their equipment and dare not make new investments. It is going to rain, and the mother is going to marry, which is also the choice of Taiwanese enterprises.

Where are the Hong Kong-funded enterprises mentioned in the previous article? Remember the Watson mentioned earlier? Just after the Spring Festival in 2016, Zhuhai Xiangfa Watong Packaging Co., Ltd., a long-established Hong Kong-owned enterprise, announced the closure of its business and withdrew from the packaging market in mainland China. Prior to this, Hong Kong-funded packaging companies in the Pearl River Delta region, including Fulong, Xingguang, Youyu, Yonggu, and Huatong, were experiencing a larger-scale defeat than Taiwan-funded packaging companies. After they withdrew, local packaging companies rose rapidly, and China's new packaging landscape was being established.

Summary:

Hedong for thirty years, Hexi for thirty years. Join us with Deng Xiaoping’s southern tour in 1992 as a starting point. Now it is almost 30 years old, almost a cycle. In the past 30 years, China's packaging industry has undergone changes in the world.

As the relationship between China and the global economy continues to deepen, foreign-funded enterprises have actively participated in the construction of China's economic system by embedding the highest value-added links, which has brought a huge boost to China's economic development and manufacturing upgrades. effect. However, each era has a different protagonist. When foreign-funded enterprises "choose the fat and the thinner" and eat the fattest fish belly, Chinese paper and packaging companies have risen from the dust and have been fighting the hardest battle. The change of the protagonist of China's packaging industry precisely reflects the change of China's status in the international division of production.

From the independent production system to joining the global division of labor, to the global industrial system, we began to gradually play a leading role. Reflecting further upstream, we can also see the rise of a number of competitive domestic equipment manufacturers, such as Jingshan Light Machinery, Zhenyuan and other companies, starting to fight against foreign companies in advantageous positions abroad.

Entrepreneurship is a lifelong affair. For packaging companies that can survive the drastic changes in the past 30 years, each one can be called a hero. Life belongs to a person only once, and only after trying and persisting can there be no regrets that a man will give up his heart.