Jul 30, 2007

Does China or India offer the best long-term growth opportunities for the plastics industry?

There is major manufacturing and research migration headed to China and India. China is the key emerging market for polymer growth today. In my opinion it is India however that offers the best long-term growth opportunities.

If you look at natural gas costs they are lower in India than in China. The American Chemical Society published comparative natural gas costs around the world in 2005. If we look at India versus China the cost is US$3.10 as compared to US$5.05 per million BTUs.

There are many other indicators which favor China. If we look at the Labor Markets (CIA Factbook 2007) it is 800,000,000 in China’s as compared to 500,000,000 in India. 500,000 engineering degrees were awarded in China out of 1 million engineering degrees awarded globally in materials science and engineering. Also according to a National Research Council report published in 2005, international corporations are expected to spend most of their R&D in China, U.S. and India in that order. Real GDP growth rates in 2006 were 10.5% in China versus 8.5% in India and for 2007 are expected to be 10% and 7.4% respectively.

So can this amazing growth continue? Are there any other concerns besides IP protection?

Some skeptics say this tremendous growth in China will continue until the Olympics. What do you think?

Outside the polymer world, if we look at retailing markets, according to Euromonitor International's latest forecasts, the Indian retailing market will grow in value terms by a total of 39.6% between 2006 and 2011, averaging growth of almost 7% a year in comparison to the Chinese market which is predicted to grow by 30.5%, averaging 5.5% per year over the same period. India is attractive for retail development as it is a relatively untapped market due to current legal restrictions on foreign direct investment (FDI). The good news for international players is that India's restrictive legislative environment is changing to their benefit. In 2007, the Minister for Indian Commerce announced plans to allow up to 51% FDI in the retailing of consumer electronics, sports goods and accessories.

In stark contrast to India, international investment in the Chinese retailing market is now entering its second stage of development and it is already proving difficult to find attractive sites for expansion in the major centers of Shanghai, Beijing, Guangzhou, and Special Economic Zones where foreign retailers are already well established.

1 comment:

msai said...

I read your memo on development comparsion of China and India. Fundamentally, I agree with your opinion. China experts in Japan expect to continue the development by about 10%/year on GDP after Olinpic. Meanwhile, India will grow by 6-8%/year in the near future. India need more inflastructures and foreign investments.

I am a SPE member of Japan section. It is interesting in your memo. Sometime, I discuss SPE activity with Ms Tricia Mcknight. I expect to come to Tokyo in the near future.