Commentary & Analysis
The China Syndrome: Rapid Growth for Global Domination
By Colin Thompson November 15,
By WhatTheyThink Staff
Published: November 15, 2007
By Colin Thompson
November 15, 2007 -- The Chinese Printing Industry is the second largest growth sector behind construction. China is scouring the world for virtually every material needed for their growth, and that alone will impact the entire planet. China's domination will have a big-time impact on the USA and Europe, followed by the rest of the world.
The Raw Data
After entering the new century, especially after its entry into WTO, China has maintained a very high speed in economy and social development. In 2003, China's GDP exceeded 11.6 trillion Renminbi (RMB), or approximately $1.4 trillion US, an increase of 8.5% over the previous 2002. The volume of import and export exceeded $851 billion US and foreign direct investment reached $53.5 billion US, up 37% and 1.4%, respectively. China's national foreign-exchange reserves reached $403 billion US, an increase of 40% over the past year. Assuming this annual growth rate continues, China will be the 'number one' industrial nation in the next two years! Present foreign-exchange reserves in 2007 have now exceeded $1 trillion US and rising. The rest of the world--in every sector--had better watch out for the changes this can bring.
China's overall national strength has increased remarkably. The development of economy, culture, press, publications, foreign trade, and with the improvement of living standard of the people, huge and diversified market needs have been created for all sectors of the printing industry, including publications, packaging, commercial printing and more. In 2003, about 190,000 kinds of books, 9,165 kinds of magazines and 2,000 kinds of newspaper were published. About 4.5 trillion RMB valued products for China's domestic market and $430 billion US-valued products for the overseas market have to be packaged and printed. This, together with other printing demands, provides a huge market for the printing and packaging industries. By 2008 the growth will be compounded year-on-year by a minimum of 40% per year up to at least 2010.
In a nation with 1.3 billion people, the size of the print industry alone is staggering. By the end of November 2003, the total number of graphic arts and printing enterprises reached 163,600, including 92,400 printing houses and 71,200 reprographic shops. The number of printing enterprises in 2007 exceeded 190,000. And the total employment reached 3 million+. Among the 118,800 printing houses, about 9,950 were engaged in publication printing, 31,300 in package printing and the rest 77,550 in other printing sectors. Among the 92,400 printing enterprises, 7,200 are state-owned, 24,000 are collectives, 2,200 are foreign invested and joint ventures, 17,000 are limited and joint-stock business, 36,000 are private enterprises, and there are still 6,200 others types of business structures. In 2003, the total production value of the printing industry was about 220 billion RMB (and that for exports was 30 billion RMB), equivalent to about $27.5 billion US, and accounting for 2% of China's total GDP. The average printing production per capita was approximately $21 US. The momentum will be to grow at a minimum of 40% compounded year-on-year.
Characteristics of Chinese Printing Industry Over the Past Few Years
While the government is pushing hard in building laws and regulations and in strengthening supervision, the industrial policy gradually opens up. As a result, the market environment has been further improved.
In July 2001, promulgated by the State Council was the new 'Regulations on Printing Industry Administration', which stipulates that the Press and Publication of Administration of China (PPA) is the only government body for administering and supervising graphic arts and printing industries in China. Since then, PPA and other related departments have drawn a number of follow up policies and regulations, such as 'Temporary Regulations on Ownership of Printing Business'. 'Temporary Regulations on Setting Up Foreign Invested Printing Enterprise'(which allows foreign investment in packaging printing sector), 'Regulations on Accepting and Producing Printed Products', 'Guidelines on Annual Inspection and Ratification of Printing Enterprises' and etc. These policies and regulations have constituted a new framework of law system for the printing industry. The concerned department and local government followed up and published policies favorable for development and investment.
In 2002 and 2003, the long lasting administrative examination and approval systems of 'Special Enterprise Permission for Establishing a Printing Business', 'Special Enterprise Permission for Individual Engagement in a Printing Business' and 'National and Provincial-specified Enterprises for Book and Magazine Printing' were terminated one after another. Central and local government departments conducted a nationwide powerful campaign of rectifying the printing market and cracking down illegal activities in printing, such as illegal publications, fake and inferior label, mark, package, paper of certificate and etc. The Government increasingly places emphasis on the role of industrial associations and organizations, while intensifies self-discipline and faithful service in the industry. The market becomes more regularized and ordered, and lawful operations are ensured and protected. All these efforts have worked to drive the industry in the health and ordered direction. In 2008, the drive will be rapid due to the Olympic Games where the world will be viewing the life in China!
Dynamic momentum in development
Some provinces in relatively developed areas have already grown up as large provinces of printing. Some of them place the printing industry in the position of urban industry in their long term development planning and adopt favorable policies for developing the industry. In recent years, the printing industry has become the 'second' largest industry in Hong Kong Special Administrative Region, with more than 4,800 printing houses, 40,000 employees and an annual industry turnover of $30 billions HK.
The printing industry has become the 'second' largest industry in Hong Kong Special Administrative Region.
Hong Kong's printing industry is now in a strategic move to the north (the direction toward the mainland) and about 70 % of Hong Kong's printing enterprises have already moved their productions to or invested joint ventures in the mainland of China. Taiwan's printing industry is also on its way of drift to the west (the direction toward the mainland) and about 400 Taiwanese printing enterprises have already been relocated in the mainland. Besides these two steams, printing enterprises in other nations are also looking for their fortunes in the Chinese printing market. The export growth for the China Printing Industry is a major strategy for many of the established Print organizations. Watch out from 2008 onward when there will be a rapid drive to export printing products to the rest of the world especially to the USA and Europe.
Thanks to the developed economy in some coastal areas, the strong momentum brought about by the reform & opening-up policy and China's acquisition of WTO membership, regional printing industrial zones are taking shape rapidly. Two regional printing industrial zones have been formed and growing rapidly in Zhujiang River Delta and Yangtse Rive Delta areas. The Zhujiang River Delta, being centered in Guangdong province, with its neighbors Hong Kong and Macao is recognized as the World Sixth City Circle. The Yangtse River Delta is centered in Jiangsu and Zhejiang provinces. In these two areas, printing enterprises are relatively large in scale, armed with advanced technologies and equipment, and the total sales income accounts for three quarters of the national income from these areas. In the Bo Hai Economic Area, represented by Beijing and Tianjin cities, the printing industry is also on the track of rapid growth.
Moving west and north, there's still more growth. With the progress of the Great West Development is hastening printing industry expansion in western provinces, especially in Sichuan and Shanxi provinces. And reconstruction of the old industrial bases in northern China will gain new momentum in development.
Excellent training programs and the use of business models are a major importance to the Chinese business culture.
Follow the money
Introduction of overseas capital into the Chinese printing industry has been very greatly accelerated. After China's successful acquisition of the WTO membership, the government newly approved 170 printing enterprises with foreign investments flowing in from 2002, and the total investment exceeded $1 billion US. Currently, the country already has 2,200 foreign invested printing enterprises, most of them are clustered in the coastal line areas, about 1,600 in Guangdong Province (in which 90% are of investments from Hong Kong) and 200 in Shanghai. The rapid growth in these regions will come in 2008 and extend through to 2020.
Zhongshan City in Guangdong Province, as an example. It is close to Hong Kong and Macao, and well known as the Town of Overseas Chinese (because of the fact that most of the households have relatives either living in foreign countries or being returnees from overseas). There are more than 1,300 printing enterprises, among which, 70 enterprises are of foreign investments. China Packaging & Printing Production Base was nominated and set-up in that city. The base occupies a land mass of 5,000 mu (equivalent to 822 acres) and has 35 packaging printing enterprises. This is another area for rapid growth for the next twenty years plus.
In 2003, the total industrial production in the base exceeded 6 billion RMB. Another example is Heshan Astros Printing Ltd., which occupies about 160 acres of land, has 180,000 square meter constructions, 40 sets of large format sheet-fed color off-set presses and 10,000 staff. Its annual production value reaches 2 billion RMB and all the products are exported to overseas markets. Printing enterprises cited above are characterized by 'large scale', 'high-tech', 'advanced equipment', 'diversified products' and good performances. High profit is a typical feature of these companies, which is believed to be brought about by cooperation among the clustered enterprises in the base. Excellent training programs and the use of business models are a major importance to the Chinese business culture.
High profit is a typical feature of these companies, which is believed to be brought about by cooperation among the clustered enterprises in the base.
Big Players from the U.S. and Japan
R.R. Donnelley invested and built printing operations in Shenzhen and Shanghai, which have already been running commercially. Toppan Printing Co., Ltd., Japan, is planning to invest $90 million US to set up a large-scale packaging printing and ink manufacturing enterprises in Shanghai with its Chinese partners, after successfully merging a large printing company in Shenzhen 10 years ago.
In addition, NIPPO Printing, Ltd. and Nishiguchi Printing, Ltd., of Japan successfully invested in Beijing and Shanghai few years ago. Asian Packaging Centre named by the World Packaging Organization and approved by the former State Economy & Trade Committee has settled in Hangzhou City, Jiangsu Province. More rapid growth is planned for the next twenty years.
Also, construction has already started under a planned investment of $10 billion US for China South International Industrial Materials City, occupying 1.5 square kilometers and with 2.2 million square meters, is jointly invested by five Hong Kong-based companies, i.e., Carrianna Group, Man Sang Group, Kin Hip Metal & Plastic Factory Ltd., and Luk Ka International Ltd. The total investment was 2.6 billion RMB. These movements provide a good platform for the Chinese packaging printing industry to enter and play in 'international markets' under the trend of economy globalization, while the huge and fast growing printing market in western China renders a new territory to foresighted investors abroad and inside the country. The global trading environment is a major strategic tool for the China Printing Industry. And it poses a question: Where will the USA and European investment come from in the future to help their home-grown industries survive?
Application of Advanced Technology
Transformation of traditional printing industries by using high-technology has made a breakthrough. In 1980s, the industry widely adopted the more advanced technology based on computerized laser typesetting and offset press, after eliminated the elder 'Hot Process' based on metallic type and casting, which had been in use for more than150 years. This was marked as a historical jump for the industry. As a result, technological level of the industry was greatly improved. Some printing enterprises even started to build information management network and carried out enterprise resource planning and business reorganization. This greatly improved business operation as increased the whole management and core competitiveness. The latest business models and work flow structures are making a great impact in all industries.
Some printing enterprises even started to build information management network and carried out enterprise resource planning and business reorganization.
In the past two years, there has been a new round of revolution, as exemplified by the widespread use of CTP, digital color proofing, commercial web-fed press and sheet-fed 8-color perfecting off-set presses. Now, CTP installations have already exceeded 250 sets nationwide. Import of commercial web-fed press maintains a dynamic momentum and about 100 sets have been installed and started commercial operation. Recently, Komori, Mitsubishi, Akiyama International, and Heidelberg have released sheet-fed 8-color perfecting off-set presses, targeting mid- and short-run high-end markets. This type of press has already gained wide recognition and about 10 sets have already been ordered or installed. China's printing equipment has been, therefore, greatly improved and raised to a higher level. The next twenty years will see a rapid movement to digital color and improved management operations.
In the publication printing sector, off-set printing accounts for 90% of the total market and in package printing sector, off-set, gravure, flexography and silk printing account for over 40%, 25%, 8% and 55%, respectively.
Structural reform of the industry has also made great progress. Within the current 92,400 printing houses, state-owned and collective enterprises take up 35%; limited and joint-stock companies, foreign invested enterprises and joint ventures take up 21%; private enterprises take up 40%. Co-existence of different types of enterprises is now a new structural pattern of the industry. Reform of stated-owned printing enterprise also shows new progress. Some non-state-owned printing enterprises have also successfully conducted internal reform. Again, a rapid improvement to challenge the rest of the world with up-to-date equipment, business models and training programs for all personnel.
Print education booming
With the constant growing of the industry, printing education shows new flourish. Right now, there are about 12 universities and institutes (including departments) that offer graphic arts related programs, with over 16,000 full time students registered in the undergraduate and associate programs and more than 3800 full time students registered in the postgraduate programs. This is the most booming period of time for higher graphic arts education in China.
Beijing Institute of Graphic Communication, the School of Publishing & Printing of Shanghai University of Science and Technology, the School of Printing & Packaging Engineering of Xian University of Science and Technology, the School of Journalism & Communication of Wuhan University are well known, because of their long history of involvement in graphic education and quality curricula. These schools, along with some new comers over the past two years, have already prepared and delivered tens of thousands graduates of various types to the industry, having greatly improved the knowledge structure and the quality of human resources of the industry. In addition, vocational education and training of various types have also been progressing.
In comparison to the European and American model of very little training and investment plus very few people entering the printing industry, the Chinese Printing Industry will have no issue with the rest of the world in taking on new business as there will be very little competition in the future.
The Japan Association of Graphic Arts Technology (JAGAT) and European Funding for Asia Investment have put in a lot of work in supporting continued education for Chinese printing industry and already achieved very good results. In comparison to the European and American model of very little training and investment plus very few people entering the printing industry, the Chinese Printing Industry will have no issue with the rest of the world in taking on new business as there will be very little competition in the future. Wake up, Europe and the USA, to the new wave of investment into education and tens of thousands of Chinese people ready to learn new ways for their future in industry.
But the enormous growth of China's printing industry is only part of the story. And size can mean nothing if there is a lack of power and depth. We'll take a look at that, and much more, tomorrow.