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China Market Watch: Drones, Online Spending, Plastics

By Dezan Shira and Associates

While China's plastics and cement industries slow, drones are on the rise
(Photo credit:) Gettyimages.com/Buena Vista Images

Rundown of the latest business and industry news from China

China's Plastics Industry Hits Slowdown

China's plastics industry has experienced a bout of slower growth, with investment into plastics machinery dropping by six percent last year, the biggest fall since the global economic recession. Despite this, the plastics industry remains a key driving force of the global industry, and by other methods of measurement, the industry is still growing. 2015 saw a 10 percent rise in demand for plastics, a figure that is 1.5 times more than GDP growth. This demand largely originates from the manufacture of cars, mobile telephones and food packaging, industries that have been requiring increasingly more plastic. China exports three times more plastics than it imports, and exports continues to grow, driven by low production costs. Commodities such as daily use products, plastic sheeting, construction materials and packaging comprises the major categories of those exports.

Males dominate Chinese online personal spending

A recent survey conducted by Ant Financial Services, an affiliate of the Alibaba Group, has challenged the stereotype that women spend more money on themselves when shopping online. It revealed that men are more likely to treat themselves than their female counterparts in China. The study was based on data collected by Alipay, China’s biggest third party online payment operator which has over 450 million users. Though the total spending volume of women was higher than men, it shows that women tend to buy more daily necessities such as household use items, whereas men were spending more on personal care and leisure products, 26 percent more than women. It also shows that men were spending 36 percent more on education, cultural products and healthcare services online. China's overall internet retail was valued at RMB 3.88 trillion in 2015, up 33.3 percent on the previous year.

China's drone industry to generate RMB 70 billion in the next 10 years

A report published by iReseach has predicted that the Chinese drone industry will generate over RMB 70 billion by 2025. This figure is categorized into aerial photography drones and civilian drones (for use in agriculture, forestry, security and power inspection), with the former comprising RMB 30 billion and the latter RMB 40 billion of the revenue, respectively. The report does not forecast figures generated from sales of military drones. Other firms, such as PricewaterhouseCoopers and Grand View Research, have predicted similar forecasts for the industry, which is expected to revolutionize many aspects of industrial operations, such as transport and farming.

Massive cuts to be made in China's cement industry

China's leading administrative authority has said that China’s cement industry, the largest in the world, will need to make significant efforts to cut overcapacity. It will need to rapidly dismantle large numbers of factories to cut 500 million tons of cement making capacity within the next three years. According to the National Bureau of Statistics and the China Cement Association, production fell by 5.7 percent in the last quarter of 2015, but capacity actually rose due to the construction of 31 new cement plants. The cement industry is the third major industry to experience drastic cutbacks in China after coal and steel, threatening to displace millions of workers. China’s cement industry has 3.2 billion tons of capacity, but has only a 67 percent usage rate, leaving 850 million tons of cement left over. A cut of 500 million tons is an astounding amount when compared to the total production of other countries; for instance, Canada’s cement output weighed in at 13 million tons in 2012.

This article first appeared on China Briefing. Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates.

Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN.

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