AICC visits China by wuyunyi

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									‘It’s time to roll up our sleeves’
  AICC’s Corrugated Industry Study Tour to China
              November 11-20, 2003




                                  A Report to AICC’s
   James E. Haglund, AICC Overseas Director
                                  Board of Directors
                 April 22, 2004     January 26, 2004
                El Spring Meeting
              AICC Conquistador Hotel, Puerto Rico
The Chinese Economy

  Dramatic sustained growth in the Chinese
  economy: 7-9% per year for past 20 years
  China economy forecast to grow 6-7% per
  year through 2006
  GDP has now surpassed $1 trillion
  Low-priced exports up 32% in 2002: in
  2003 nearly $120
  Overseas investment in China reached $53
  billion in 2002
Participants
Chris Burrows, Hycorr Machine    Bill Mazzacco, Packaging
John & Pat Carman, Standfast         Innovators Corp.
   Packaging                     Paul Murphy, Menasha
Ben DeSollar, Sumter                 Packaging
   Packaging                     Gary A. Pirko, Alpak
                                     Container Corp.
Jeffrey Edelman, National
   Packaging Cos.                Karl Schoettle, Annan & Bird
                                     Lithographers
Don Green, Fibre Containers      Tom Shallow, Fitzpatrick
Jim Haglund, Central Container       Contianer Company
   Corp.                         Brent Woolston, Intelligent
Greg Hall, Corrugados de Baja        Machine Control
Tyler Howland, Sound             Steve Young, AICC
   Packaging
Bruce Janowsky, Jamestorn        Jerry Blaze, Cynergy-Global
   Container Corp.               Joe Carroll, Cynergy-Global
                                 GeFei Li, Cynergy-Global
Itinerary – Beijing,
Shanghai, Guangzhou
 Heard Presentations from:
   GeFei Li, Principal of Cynergy-Global
   Craig Allen, Commercial Attache, US Embassy
   Dr. Li Xi Ming, on cultural, economic aspects,
   business practices
 Toured four box plants
 100% recycled paper mill
 Corrugated machinery manufacturer
Study Tour
Study Tour
Study Tour
What we learned


“The Comfortable
Society…” through “a
diversity of ownership
structures.”
          Dr. Li Ming-Xing
What we learned

“ With a comparative
advantage in one key
component – labor –
they will continue to be a
force to reckon with.”

    Craig Allen, US Embassy
    Industry Census: Corrugated Box
    Companies in China

     Approximately 23,000 Box
       Makers in China

             Class One: 100
             factories, vertically        Class 1
             integrated from              Class 2
             paper-making to box          Class 3
             converting
             Class Two: 2,500
             corrugator plants
             Class Three: 20,000
             sheet plants



Source: Reed-Huayin Publishing Co. Ltd.
Industry Statistics
 Fragmentation
 Highly competitive environment: easy entry into
 market with basic equipment, lots of labor, easy
 capital
 Over-capacity: only running at 80% capacity,
 according to CPTA
 Paper quality still an issue
 Labor-dependency apparent in plants we saw
 Domestic corrugated machinery industry growing
What we learned
“The Chinese are very
good at running profitable
operations by efficiently
using the materials and
capital equipment they
have. I have seen many
occasions where a small
entrepreneur in the box
business has outrun the
investment of some of the
major multinational
companies.”
     GeFei Li, Principal of
         Cynergy-Global
Beijing No. One
Beijing No. One
Beijing No. One
Shanghai
Shanghai
Paper industry Issues
•Overcapacity: Nine Dragons and others are
building newer mills at dramatic rate; Taiwan,
Indonesia also investing heavily
•Fiber Quality and Cost: local OCC (low quality)
is $90/ton; AOCC (American) is $135
•Vertical integration beginning: mills acquiring
or building box plants (Nine Dragons, for
example)
•Chinese government beginning environmental
controls
Ownership Structures

Privately owned

Private-state partnerships

Local government ownership

Foreign-owned joint ventures
Tax Advantages – Foreign
Joint Ventures
First two years of profit: tax free

Next three years, 50% of normal rate
(15% versus 30%)

Import duties waived for items to be
remanufactured for export
(linerboard, for example)
A brief analysis –
Equipment
  Corrugators
  The research conducted among Chinese
  Top 100 Box makers

                          Corrugator Line


  Producing     China        Japan /        Taiwan   Europe /
   Original    Mainland       Korea                    US.
  Percentage     40%          17%            31%      12%
A brief analysis –
   Equipment
    Printing Equipment
    The research conducted among Chinese
    Top 100 Box makers

                           Printing Equipment


   Producing     China         Japan /          Taiwan   Europe /
    Original    Mainland        Korea                      US.
   Percentage     39%            10%             29%      22%
A brief analysis –
   Equipment
   Converting Equipment
   The research conducted among Chinese
   Top 100 Box makers
                     Converting Equipment


Producing     China       Japan /       Taiwan    Europe /
 Original    Mainland      Korea                    US.

Percentage     45%          10%             29%    16%
Challenges for China
  Already getting into an overcapacity
  situation.
  New equipment arriving daily.
  Internal consumption will eventually
  begin to level the playing field.
    Automobiles – fuel reserves
  Automate to compete
  Pressure to bring currency into line
Challenges for Us
 Get better
 Get leaner
 Think globally – there are opportunities if
 we understand the landscape
 Not for the faint of heart: need to develop
 on the ground relationships there to help
 our customers
 Urge our government to create a level
 playing field
Challenges for Us



“It’s time to roll up our sleeves”

								
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