Starting out with banana leaf wrapping centuries ago, China’s packaging industry has witnessed a rich history culminating in modern day state-of-the-art environmentally friendly and biodegradable packaging solutions, which now are produced by the leading packaging companies in China. With steady growth rates ever since the mid-1980s, the packaging industry has become a significant driver of China’s development as it contributes 2.5 per cent to the country’s RMB 30 trillion (RMB 1 = approx. USD 0.14) large GDP.
When compared internationally, China ranks as the world's third largest packaging market and the government’s attention to the sector is high due to the more than three million people it employs. With a total of almost 12,000 packaging manufacturers the industry remains hugely fragmented and a high number of small-and-medium-sized companies exist. 70 per cent of all packaging manufacturers are located in the three main economic regions and more than 30 per cent have a presence in the Yangtze River Delta. Zhejiang Province, with more than 15 per cent of all players, and Jiangsu Province, which is home to one in every ten packaging companies, are the regions with the highest density of manufacturers.
A look at China’s top ten packaging players reveals that only a few are of international weight in revenue terms. Notably, Nine Dragons Paper (Holdings) Limited which was listed on the Hong Kong Stock Exchange in March 2006, achieved revenues of RMB 14.1 billion in 2008; 42 per cent up from the previous year. It runs four major production sites across China and recently spread its manufacturing interests into Vietnam. Famous for its aggressive expansion through green-field plants as well as selective acquisitions, Nine Dragons’ focus lies on containerboard products, a field largely avoided by foreign players due to its low margins. Ball, Alcan, and Tetra Pak – to name a few of the non-Chinese packaging manufacturers with activities in China – have all focused on higher-valued and technologically more advanced products.
Most recent announcements prove Tetra Pak’s further market inroads into aseptic carton packaging. On 9 July 2009, the Sweden-based packaging giant opened a new converting plant valued EUR 60 million (EUR 1 = approx USD 1.41) in Hohhot, the capital city of the Inner Mongolian Autonomous Region, home to two key clients, dairy companies Yili and Mengniu. But the investment comes in handy for a number of others since it increases Tetra Pak’s total output in China to cumulatively around 50 billion packs per year. This development also demonstrates that an industry which was special for its high degree of vertical integration is gradually disintegrating. Previously, many packaging users had their own packaging enterprises to manufacture their own packaging products. This practice was derived in response to a lack of availability of quality packaging materials. The further market penetration of technically advanced companies will enhance this trend over time, a positive move in the eyes of Beijing.
To read the rest of this article by Stefan Kracht and Thaddäus Müller, please visit BusinessForum China at www.bfchina.de. BusinessForum China is a magazine and website dedicated to China business news and analysis, regarding the China economy and the China market .