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Packaging’s growth in China creates a threat

-- Packaging Digest, 8/13/2010 5:24:10 PM

A milestone was passed last month that many did not notice: China has surpassed the U.S. as the world’s largest consumer of energy resources, according to the Intl Energy Agency. Meanwhile, that country’s economy in the second quarter “slowed” to a 10.3 percent annual growth rate, while much of the world languished.

I have long been a sinophile, having studied China’s transformation over the last three decades. While I admire the industriousness of the Chinese people, I do wonder how that country’s growth will affect the U.S. in general and the packaging sector in particular.

Many U.S. packagers already have lost business to competitors in China. It’s no wonder when an increasing percentage of consumer goods sold here are manufactured—and packaged—in China.

The Chinese government now considers packaging a “vital national industry.” A 2009 study by Euromonitor Intl points out that packaging is China’s 14th largest industry sector and employs more than three million workers. The market is valued at $81 billion a year and contributes about 2.5 percent of China’s GDP. The study predicts packaging’s annual growth rate at 16 percent through 2015, exceeding that of the nation’s economy.

Many persons believe China’s success comes at the expense of other countries. That nation’s increased energy consumption, for instance,  is bound to drive up the global costs of scarce energy resources, even though the country relies more on coal and natural gas than oil. The effects won’t always be obvious. These higher prices will affect packaging in ways other than transportation costs because petroleum products form the backbone of many plastics used in packaging.

At a time when many countries—such as the U.S.—tout free trade, China is accused of illegally subsidizing exports, dumping products at prices below cost, abusing the labor rights of its workers and manipulating its currency to make its exports cheaper and imports expensive. At the same time, its government often fails to protect intellectual property rights and allows businesses to operate with little oversight on product safety standards, while gaining a reputation as the world’s worst polluter.  All this, it is claimed, has cost millions of American jobs.

There is little that any one of us can do to halt this growing snowball as it rolls downhill. The U.S. and Chinese economies are tightly intertwined, so we can’t just close the door on trade between the two countries. However, we can encourage U.S. policymakers to stand firm to insure businesses in both countries compete on a level playing field.  Maybe we just need to remember that China is a “frenemy,” a business partner who is simultaneously a competitor and rival.

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