Several of country’s largest plastics firms say their domestic business is returning to levels before the crisis, and one projection said the industry will resume overall double-digit growth in the second half of this year.

Still, some companies said they are bullish on strong local demand, particularly in industries like construction, automotive and electronics for the local market.

“From our orders you would say we have almost recovered from the bad situation,” said Willis Guan, deputy president of global sales and marketing at China’s largest compounding firm, Kingfa Science and Technology, in Guangzhou, Guangdong province.

But like others, he cautioned that it’s hard to tell if it’s sustainable, as sales have only approached pre-crisis levels in the last month or two.

China’s largest injection press making company, Ningbo Haitian, said domestic sales have climbed to pre-crisis levels since April.

A Haitian executive said the country’s 4 trillion yuan (US$586 billion) stimulus package has helped boost consumer confidence and ultimately orders, but he also said Haitian may be faring better than other Chinese manufacturers because of an upgraded product mix.

Statistics show some signs of an uptick. The country’s largest plastics industry trade group, the China Plastics Processing Industry Association, projected in June that growth in the second half of the year would be more than 10%, from just over 9% earlier in the year.

The country’s Ministry of Industry and Information Technology said plastic end-product output grew more than 7% in the first five months of the year, even as export output declined 12%. More broadly, China’s GDP rose 7.9% in the second quarter, up from 6.1% in the first quarter.

The growth reflects a trend of Chinese firms focusing less on exports and more on their domestic market.

“We see some structural changes in the China plastics processing industry and the growing demand as a consequence of our customers adapting to their own drop in exports,” said Helmar Franz, executive vice-president at Haitian in Ningbo, Zhejiang province. “Chinese moulders are able to do this very fast.”

For some export-oriented firms, though, conditions remain very difficult.

Alfred Au, vice-chairman of the Hong Kong Mould and Die Council, said that business in export sectors like mould making for mobile phones and electronics are off 50%. He said manufacturing in China has substantial overcapacity, agreeing with a June estimate from Hong Kong industrialist Victor Lo that there’s roughly 30 to 40% manufacturing overcapacity in the export-oriented South China region.

“If you visit those manufacturers now, most of them are working at 30 to 40% of their capacity,” said Au, who believes the changes are permanent and the previous boom times for China’s manufacturers will not return as they had been.

“I think the golden period is past — it is not just a seasonal problem,” said Au, who is managing director of Hong Kong-based Inmold Technology. “We are facing the most complicated time in our lives.”

Chinese extruder maker Nanjing Giant said it is seeing signs of improvement — sales are now at about 80%of pre-crisis levels, compared to 50% earlier in the year.

But it’s not clear if conditions will improve in the next few months, said General Manager Huo Qingxian, who said business at the Nanjing, Jiangsu province based firm remains tight and customers continue to ask for steep discounts: “It’s very, very quiet… Everybody wants to keep money in their pocket.”

Some firms interviewed said they are pushing ahead with investments.

Kingfa is planning to build a factory in Zhuhai, Guangdong province to focus on biobased plastics, and Hong Kong compounder Ngai Hing Hong plans to set up a small facility in Tai Po, Hong Kong, to take advantage of new tariff arrangements under the Closer Economic Partnership Agreement between Hong Kong and mainland China.

Ngai Hing Hong Director Anthony Wong said the company’s mainland Chinese business is at levels it was before the economic crisis and growing solidly, and its exports are showing some, albeit fragile, signs of picking up.

But he said ultimately, the Chinese economy is not decoupled, and a full recovery will be linked to how the rest of the world does: “The future still depends on the worldwide economy.”

Source: http://www.prw.com/subscriber/headlines2.html?cat=1&id=1248684046