According
to the statistics regarding public information from the People’s Court
Announcement, more and more small and medium enterprises (SMEs) in the Chinese
coatings industry are confronted with bankruptcy. This phenomenon has aroused
concerns among many market insiders in terms of the future development of
Chinese coating SMEs.
A great
number of coatings SMEs in China have been closed so far in 2019, such as
Jiangmen Texin Coating Co., Ltd., Zhejiang Zhuchao Coatings Co., Ltd., Hangzhou
Zhuchao Paint Chain Co., Ltd. and Kunlun Coatings (Shanghai) Co., Ltd. Recently
on August 4, another coatings company declared bankruptcy because of a private
lending dispute, according to an official post from the People’s Court
Announcement.
Private financing considered as what ends Chinese
coatings SMEs
It is found
that the enterprises declaring bankruptcy are characterized by small or medium
sizes and most of them are located at the third or fourth tier cities in China.
Take
Jiangmen Texin Coatings Co., Ltd. (Texin Coatings) mentioned above for
instance. Seated at Zhongxin chemical industrial zone in Jiangmen, Guangdong,
Texin Coatings used to produce and sell water-based paint. Its
main products included acrylic varnish and thinner for acrylic resin paint. On
April 29, 2019, the company was accused in a contract dispute and a private lending dispute. After
nearly two months, it announced to go bankrupt.
At present,
bank loans, financing platforms and private financing are the most popular
financing ways for coatings enterprises in China. However, due to the long and
complicated process of bank loans, a lot of SMEs turn to private financing at
the cost of high interest, which is what brings them into bankruptcy.
High-quality enterprises to exceed SMEs with
more market shares in Chinese coatings industry, despite slowdown of production
In the view
of some market insiders, the financing environment of Chinese coatings industry
is more inclined to high-quality enterprises. With the expansion of capacities,
high-quality coatings companies occupy more shares in the market than SMEs,
which cuts down the living space for SMEs.
Besides,
under the strict environmental policy in China, enterprises are under great
pressure when it comes to the safety during production, which is likely to
cause a slowdown in coatings output. It is estimated by the China National
Coatings Industry Association (CNCIA) that the Chinese output of coatings will
get to 18,600,000 tonnes in 2019, with a rate of growth at around 6%. The value
of the output is predicted to reach RMB 343 billion with a rate of growth at
about 5%.
Competition to increase among leading coatings
enterprises in China
Due to the
increasing prices of raw materials, production costs and labour force, a lot of
uncertainties are faced by the production and the market of coatings, according
to an observer of the coatings industry. Hence, the entrance for SMEs into
chemical industrial zones gets higher and higher. Enterprises have to alter
themselves for more development space and sustainable business.
In the
future, competition will focus more on the leading brands in the coatings
industry and it will be very difficult for SMEs to develop themselves. It is
predicted that the market demand tends to direct more at eco-friendly coatings
with high performance, such as powder coatings and waterborne wood coatings.
Therefore, innovation of technology is considered as an important advantage in
the coatings industry.
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