China is the most populous country in the world, as well as the world's largest producer and consumer of rubber and plastic products. The manufacturing of rubber and plastic products has always been a traditional industry in the Chinese economy because these products are widely used in other manufacturing sub-sectors and the automotive industry.
Since joining the World Trade Organization (WTO) in 2001, China has improved market access conditions in accordance with WTO standards, and has adopted a number of preferential policies in the rubber and plastics industry to accelerate the development of the industry. Simplified administrative approval measures for new projects have attracted new investment, but they have also sparked speculation about oversupply.
Although the contribution of the rubber and plastic products industry to China's gross domestic product (GDP) is only about 2%, it still occupies an important position in the light industry, accounting for 12.8% of its sales revenue in 2019. Over time, the rubber and plastic product manufacturing industry has grown significantly and has become a modern manufacturing sector that uses new materials and new technologies to promote development. At present, the United States, China's main trading partner, has imposed additional import tariffs on thousands of rubber and plastic products. At the same time, China is implementing rapid structural adjustments, and the economy is shifting from industry-oriented to service-oriented, which is also a factor in the slowdown in manufacturing growth in the past few years. Despite these challenges, China is still the world's largest producer, consumer and exporter of rubber and plastic products.
In 2020, China's rubber and plastic production and logistics will be affected by the new crown epidemic, which has added new uncertainties to the country's economic growth. The epidemic has led to global industrial production cuts and supply chain disruptions, leading to a decline in demand in China and the entire global market.
Industry overview
China's rubber and plastics processing industry provides products for many industries, supports China's industrial growth, and therefore plays a vital role in the national economy. The development of domestic automobile, construction and pharmaceutical manufacturing industries has stimulated the demand for rubber and plastics. Although China`s industrial growth has slowed down due to trade tensions and weaker domestic demand, given China`s growing population and urbanization, the production of rubber and plastic products will continue to expand.
Segment industry opportunities
Some high value-added sub-sectors in the rubber and plastics industry have many development opportunities, such as rubber and plastic parts used in the aerospace and automotive industries and other special-purpose technical products. These sub-sectors have not been fully developed due to limited technological levels. Chinese manufacturers are increasing R&D investment to provide high-tech products and bring cooperation opportunities in technological development. In order to reduce the so-called "white pollution", that is, plastic pollution, the government urges manufacturers to switch to biodegradable products instead of plastic bags and disposable plastic products.
Industry Outlook
In 2020, due to the impact of the new crown epidemic, the growth rate of China's rubber and plastics industry is expected to slow down significantly, which has harmed its performance in the first half of the year. With the epidemic in China under control, industry growth will resume in the second half of 2020. However, the second wave of epidemics that hit Europe and the United States will put pressure on China's exports of rubber and plastic products. According to data from EMIS Insights, in 2020, China's primary form plastic production will increase by 5.9% year-on-year, reaching about 103 million tons. Domestic demand is its main driving force. The output of plastic products is expected to increase by 2.6% year-on-year to about 84 million tons. From 2020 to 2024, China's primary form plastics and plastic products production is expected to grow at an average growth rate of 5.3% and 2.4%, respectively. The Chinese government issued a plan in January 2020 to restrict the production and sales of single-use plastic products during the period 2020-2025, while promoting the application of recyclable and degradable alternative products, which is part of the national action to control environmental pollution. The production of rubber products in China will continue to be affected by the structural adjustment of the industry. According to data from EMIS Insights, due to the sharp decline in demand in the automotive industry in the first half of the year, in 2020, the output of rubber tires, as the main product of the sub-industry, will drop by 0.6% year-on-year to about 837 million. The government's measures to resolve tire overcapacity and the slowdown in the growth of China's auto industry will restrict the development of the industry. Affected by these factors, it is expected that the industry's average decline will reach 0.5% between 2020 and 2024. Rubber and plastic products companies must increase investment and develop more advanced and high value-added products, which will inevitably increase production costs and reduce manufacturers' profitability.
