China Packaging Industry Report 2006

中国包装行业 2006
China Packaging Industry
Overview 2006
An industry analysis report from China Intelligence Online.
Informing business in China.

China Intelligence Online www.chinaintelligenceonline.com
中国中国中国中国包装包装包装包装 China Packaging Industry 2006 | Informing Business in China 2
1 Table of Contents
1 TABLE OF CONTENTS.........................................................................................................................2
2 CHINA INTELLIGENCE ONLINE............................................................................................................3
3 FOREWORD TO THE CHINA PACKAGING INDUSTRY REPORT ...............................................................4
4 INDUSTRY SNAPSHOT .......................................................................................................................5
5 THE GEOGRAPHY OF CHINA’S ECONOMIC ENVIRONMENT..................................................................6
5.1 PEARL RIVER DELTA (PRD)......................................................................................................................6
5.2 YANGTZE RIVER DELTA (YRD) ..................................................................................................................7
5.3 BOHAI BAY..........................................................................................................................................8
5.4 WESTERN CHINA ..................................................................................................................................8
6 CHINA PACKAGING INDUSTRY.........................................................................................................10
6.1 INDUSTRY OVERVIEW ...........................................................................................................................10
6.2 GROWTH TRENDS AND INDUSTRY FORECASTS.............................................................................................12
6.3 PAPER PACKAGING INDUSTRY .................................................................................................................18
6.3.1 PAPER PACKAGING ...................................................................................................................................... 18
6.3.2 INDUSTRY DEVELOPMENT ............................................................................................................................. 18
6.3.3 CHEMICALS IN THE CHINESE PAPER INDUSTRY 2005.......................................................................................... 20
6.3.4 PAPER PACKAGING PRODUCTS....................................................................................................................... 20
6.3.5 PAPER AND THE PAPER PRODUCT IMPORT MARKET ........................................................................................... 21
6.3.6 FOOD PROCESSING & PACKAGING (P&P)........................................................................................................ 21
6.4 PLASTIC PACKAGING INDUSTRY ...............................................................................................................22
6.4.1 INDUSTRY TRENDS....................................................................................................................................... 23
6.4.2 INDUSTRY NEEDS......................................................................................................................................... 27
6.4.3 PACKAGING PRINTING.................................................................................................................................. 28
6.4.4 PACKAGING PRINTING MACHINERY INDUSTRY................................................................................................... 28
6.4.5 DIGITAL PRINTING ....................................................................................................................................... 29
6.4.6 INK ........................................................................................................................................................... 29
6.4.7 METAL PACKAGING ..................................................................................................................................... 29
6.4.8 GLASS PACKAGING ...................................................................................................................................... 30
6.4.9 FUTURE DEVELOPMENTS .............................................................................................................................. 31
6.5 PACKAGING MACHINERY .......................................................................................................................32
6.5.1 INDUSTRY OVERVIEW................................................................................................................................... 32
6.5.2 COMPETITOR ANALYSIS ................................................................................................................................ 33
6.5.3 OPPORTUNITIES FOR INTERNATIONAL FIRMS .................................................................................................... 36
6.6 END-USER ANALYSIS ............................................................................................................................39
6.6.1 RURAL FIRMS & TOWNSHIP ENTERPRISES ........................................................................................................ 39
6.7 FOOD...............................................................................................................................................42
6.8 INDUSTRIAL PACKAGING ZONES...............................................................................................................43
6.9 LOCAL SOURCING................................................................................................................................43
7 DISCLAIMER ...................................................................................................................................44

2 China Intelligence Online
China Intelligence Online gathers business intelligence and provides analysis as well as general business
services for international organisations working or interested in the Greater China and East Asia
markets. Business services include company establishment, customised research, sales and marketing,
and client representation.
Our researchers and analysts collectively have decades of experience on the ground in Mainland China,
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represents the real opportunities in the coming decades.
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3 Foreword to the China Packaging Industry Report
This report was written in early 2006 and hence relied heavily on data compiled in 2004-5. For this reason,
CIO are currently working with the China Packaging Technology Association to compile a fully updated and
revised edition due for publication at years’ end.
For such a large and growing industry, reliable information about packaging in China has remained relatively
elusive, prompting the need for a thorough overview. In the past thirty years since economic reforms took
hold, a mass consumer society has developed in China, leading to an explosion in sales for items ranging
from instant noodles to DVDs.
Economic growth has brought changing lifestyles to China, as hundreds of millions of people have escaped
poverty and entered the burgeoning middle class. Correspondingly, products catering to busier lifestyles,
such as processed food, have become increasingly valuable.
In the years since this report was written, a major global economic crisis threw a wrench into all sectors of
the Chinese economy, including the packaging industry. As painful as the crisis has been for many global
economic players, the long-term outlook for packaging in China remains brisk.
Inefficiencies and inadequacies continue to plague domestic firms in the Chinese market, indicating
enormous opportunities for international companies. China Intelligence Online’s Packaging Industry Report
has the detailed information international players need to understand one of China’s most significant
markets.

4 Industry Snapshot
When the China Packaging Technology Association (CPTA) was formed in 1980, total packaging output in
the country totalled only CNY 7.2bn. That year marked just the third year of the economic reform era in
China, an era marked by astonishing growth in all sectors of the economy. Packaging is no exception; by
2005, total output value has grown to a robust USD 39.5bn, a number projected to increase to USD
55.5bn by 2010 and USD 74bn by 2015.
Surging demand for packaging materials within China has helped fuel development in the industry itself.
At present, more than 20,000 firms employing well over 3m workers operate within the packaging
industry, a market size that has caused many analysts to compare China to South Korea and Taiwan ten
years ago.
Suppliers within China purchase most basic equipment from domestic sources whilst most rely on
foreign imports for more advanced equipment. This trend indicates that the Chinese market, while
developing rapidly, still has ample room for maturation.
Traditionally, most packaging industry end-users have prioritised price over all else, though this trend
appears to be changing. As lifestyles change, more consumers within China now consider quality,
aesthetics, and even environmental protection when in purchasing packaging materials.
Within the industry itself, plastic packaging is now experiencing the fastest growth, as more and more
Chinese manufacturers substitute plastic for glass and metal packaging. At present, the plastic packaging
industry grows at over 10 percent annually, as the industry—which grows from a low production base—
matures.
One trend to watch in coming years is the growing use of recyclable materials, as environmental
consciousness continues to permeate the packaging industry in China. International firms with the
capability to provide high-quality, environmentally-friendly materials may see their fortunes rise in the
coming years. In any event, the future for the Chinese packaging industry as a whole is undeniably
bright.

5 The Geography of China’s Economic Environment
Like all other industries within China, the packaging industry operates under the peculiar structure of the
Chinese economy, a structure different from similar-sized economies in the developed world. Rather than
existing as one, large, integrated economy, the Chinese economy functions rather as an agglomeration of
several distinct economic regions, each with closer ties to the outside world than to each other. Because
these regions function in a similar way to individual countries with their own tariffs, regulations, and
requirements, one consequence has been the absence of many large firms for an economy as large as
China’s.
The following is a brief description of the major regions comprising the Chinese economy:
5.1 Pearl River Delta (PRD)
The PRD Economic Zone (PRDEC), which consists of Guangzhou, Shenzhen, Dongguan, Foshan, Zhongshan,
Zhuhai, Jiangmen and parts of Huizhou and Zhaoqing, has since the start of the ‘Open Door’ policy been
China’s most vibrant economic region. The region is now an important industrial market for all kinds of
inputs, materials, and capital goods as well as a major market for transport and transport related services.
Per capita income has been growing steadily over the past thirty years, hand in hand with consumer
expenditures, making cities such as Shenzhen and Guangzhou among the most prosperous in the Chinese
Mainland. The region’s proximity to Hong Kong, one of the primary catalysts for the region’s early
development means its consumer tastes closely follow those of the west, creating attractive markets for
foreign retailers.
Although the PRDEC accounts for only 0.4 percent of China’s total land mass and less than 4 percent of the
nation’s population, it accounts for more than 10 percent of the country’s GDP, and attracts almost 20
percent of all inbound FDI.
At present Hong Kong companies employ more workers in the PRD region than the entire population of
Hong Kong
The Greater and Pan-PRD Economic cooperation zone
At present Hong Kong companies employ more workers in the PRD region than the entire population of
Hong Kong. With more and more businesses in the PRD straddling the three administrative regions of
Guangdong, Hong Kong and Macau the government has established the Greater Pearl River Delta (GPRD)
Economic Cooperation Zone. The role of which is to integrate Hong Kong and Macau into the wider Chinese

economy by streamlining investment regulation across the entire region and rationalising and integrating
logistics development in the GPRD Area.
Included in the zone are Hong Kong, Macau and nine Guangdong municipalities. The infrastructure projects
spearheading integration include improved road infrastructures, the construction of the Guangzhou
terminus of the national inter-modal rail network that will incorporate 18 full containerised rail hubs
nationwide and increased air freight integration between Hong Kong and Guangzhou Baiyun Airport.
At present Hong Kong is still China's biggest investment conduit. In an effort to stretch the benefits of that
investment further into the southern China hinterland the government has also established the Pan-PRD
Economic Zone. With economic growth and prosperity in the coastal regions far outstripping the west the
government, and business, are keen to move production further inland.
Increasingly as Shenzhen becomes a victim of its own success and land and wage rates rise, forcing the
industrial hinterland further back into China makes sense. Integrating logistics infrastructure in the eight
provinces surrounding the GPRD is hoped will encourage investment into the wider South China region as a
whole.
5.2 Yangtze River Delta (YRD)
Beginning in the early twentieth century, Shanghai has been a magnet for foreign finical interest for almost a
century – an interregnum of a few decades of staunch Stalinist policies notwithstanding. This continued
interest has largely been the driving force for the development of the region over the past three decades.
In 1990s, the Chinese government opened the Pudong district of Shanghai to overseas investment, as well as
additional cities along the Yangtze River valley. Since then, the Yangtze River delta has become one of
China’s key economic regions. It consists mainly of 15 cities, including Shanghai, Nanjing, Suzhou, Zhenjiang
and Wuxi, although its scope has recently been widened to include Taizhou City in Zhejiang Province.
Yancheng, Huai'an and Ma'anshan cities in Jiangsu and Anhui provinces are also likely to join the economic
grouping.
The region is home to 10 percent of China’s population and it generates just over a fifth of China’s GDP and
about a third of China’s foreign trade. Pudong enjoys many privileges not yet available to other zones. In
addition to reduced duties and income tax, foreign financial institutions have also been allowed to set up in
the region along with a stock exchange. It has therefore become the financial centre of China with 180
Chinese and foreign-funded financial institutions.

The Chinese government has identified the development of a number of ‘pillar industries’: automotive
(including components and spare parts), microelectronics and computers, household electrical appliances,
pharmaceuticals, optical, mechanical, and electrical products.
High GDP per capita rates within the region continue to ensure that the area remains a major point of
interest for foreign manufacturers looking to capitalise on the increasingly affluent spending habits of
China’s burgeoning middle classes.
5.3 Bohai Bay
The Tianjin-Beijing Bohai triangle accounts for around nine percent of national GDP, with per capita incomes
well above the national average. The primary driving force behind economic development in the area has
been due to the twin poles of the two cities.: Beijing, the seat of political authority, and Tianjin, the capital’s
gateway to the sea and hence the wider world. The region also includes some cities in Hebei, Shandong and
Liaoning provinces, many of which are at different stages of development.
Economic development in the triangle, in contrast to the PRD, and to a lesser extent the YRD, has in the past
been restricted by an overall lack of coordination, which has to a large degree been the result of different
administrative regions, each with separate responsibilities. This fragmentation in terms of administration has
often meant that regions within the triangle often see themselves as in competition with neighbouring
municipalities and counties.
The third largest city in China, and the industrial capital of the northeast, Tianjin is one of China’s four
municipalities directly under the control of the central government – the others being Shanghai, Chongqing
and Beijing. Located 120km southwest of Beijing, the city is linked to the capital by high-speed train at a
maximum speed of 350km per hour unveiled last year in time for the opening of the Beijing Olympics. The
introduction of the service has effectively put the city in the commuter belt of the capital, and vice versa,
greatly enhancing economic integration between the two. The shift of passengers from the conventional rail
network has also freed the older network for utilisation as a freight route.
5.4 Western China
The region known as Western China has long lagged behind the east in terms of economic development.
Two major factors account for this discrepancy; China’s western provinces are far from the sea, a hindrance
in such a historically export-dependent economy, and the region’s mountainous topography, making
infrastructure development historically difficult.

In the late 1990s, the Chinese government launched the ‘Go West’ strategy, a series of investment incentives
intended to bring economic development to this once neglected region. Many major companies, attracted
by talented worker pools and low labour costs, established operations in western China, bringing added
attention to the region.
Western China, in addition to being abundant in natural resources, also serves as the gateway to several of
China’s most important international links. The provinces of Yunnan and Guangxi in the southwest have
established firm economic ties with the nations of Southeast Asia, ties that also include more and better
international transport links. Xinjiang and other regions in the northwest of China, meanwhile, are important
due to their proximity to the energy-rich nations of Central Asia.
Whilst Western China still cannot boast the same degree of wealth and development as the coastal region,
its emergence in the past decade have made it a place both domestic and international market players have
begun devoting significant attention.

6 China packaging industry
6.1 Industry overview
Over the past few years China’s packaging industry has undergone a rapid transformation and all indicators
seem to point to the fact that this rapid transformation is likely to continue apace. Fuelled by continuously
growing consumption and higher living standards many companies engaged in the packaging industry, both
domestic and foreign, packaging and packaging technology, have experienced rapid growth. In addition to
linear growth, the China packaging industry is almost certainly the most dynamic in the world, with new
growth areas emerging in almost every aspect of the market.
The year the China Packaging Technology Association (CPTA) was formed, and shortly after the Deng
Xiaoping ushered in the era of reform, 1980, China’s packaging industry output totaled little more than CNY
7bn. But with China’s continual march toward prosperity moving forward the industry was estimated to have
reached USD 39.5bn in value by the end of 2005 and, should growth continue as forecast, USD 55.5bn by
2010; an average annual increase of 7 percent. By 2015 output value is expected to reach USD 74bn. At
present, more than 20,000 packaging companies in China, employing well over three million employees
across the country.
In terms of technology, as China has developed, so has the packaging industry. By the end of 2005 there
were over 1,600 domestic packaging machinery manufacturers capable of producing almost two thirds of
the 4,000 different packaging machines produced globally. In this respect, as in many others, China has
absorbed and assimilated new methods and technology at a staggering rate.
Currently most of the imported equipment in China comes from within the Asia Pacific region, with suppliers
from Taiwan and South Korea, Japan being amongst the most successful. In the last few years the value of
packaging equipment imported annually has reached around USD 2bn, China packaging machinery import
market the second largest in the world. In general thus market primarily consists of higher value, higher
technology equipment with domestic suppliers able to manufacture equipment to meet the needs at the
lower end of the market.
Despite the sectors dependence on imported technology, the technological progress of domestic producers
is rapidly approaching international levels. To this end, many in the industry have compared the market to
that of Korea of Taiwan ten to fifteen years ago. Regions that are now both among the most technologically
advanced in the world in packaging terms.
Surging demand, and recognition by the central government of the strategic importance of the sector, has
helped to fuel development in the packaging industry. In light of this, China recently received approval to

China Intelligence Online
中国中国中国中国包装包装包装包装 China
establish the Asia Packaging Centre (
Organization (WPO) and the Chinese
Focusing on packaging manufacturing, the APC will
friendly packaging, operation, recycling packaging w
practices into the domestic industry.
global levels of excellence in the industry, as well as associated knock
whole.
The table below illustrates CPTA membership by sector.
Source: CPTA
Members of the China Packaging Technology
Plastics packaging
Packing machinery
Metal packaging
Others
www.chinaintelligenceonline
China Packaging Industry 2006 | Informing Business in China
establish the Asia Packaging Centre (APC) in Hangzhou, Zhejiang Province, under the World Packaging
) and the Chinese State Trade and Economic Commission.
Focusing on packaging manufacturing, the APC will be to integrate new technology
tion, recycling packaging waste – managerial, trade, information, and service
domestic industry. It is hoped that establishment of the centre will help China achieve
global levels of excellence in the industry, as well as associated knock-on effects across th
CPTA membership by sector.
27%
26%
8%
18%
9%
5%
7%
Association by sector
Plastics packaging Paper packaging
Packing machinery Packing decoration and pronting
Metal packaging Glass packaging
chinaintelligenceonline.com
Informing Business in China 11
under the World Packaging
new technology - e.g. environmentally
trade, information, and service best
It is hoped that establishment of the centre will help China achieve
on effects across the economy as a
Packing decoration and pronting

6.2 Growth trends and industry forecasts
China’s Packaging Products Output Value (USD billions)
USD billions 2001 2002 2003 2004 2005
(estimated)
2006
(predicted)
2007
(predicted)
2008
(predicted)
Paper Packaging 15.58 17.12 18.81 20.67 22.72 24.76 26.99 29.42
Plastic
Packaging
3.62 4.07 4.57 5.14 5.78 6.41 7.12 7.90
Glass Packaging 5.41 5.76 6.12 6.51 6.93 7.35 7.79 8.25
Metal Packaging 2.21 2.40 2.61 2.83 3.08 3.33 3.59 3.88
Others 1.66 1.67 1.68 1.69 1.70 1.71 1.72 1.73
Total Value 28.48 31.02 33.79 36.84 40.21 43.56 47.21 51.18
Source: CPTA
In general, in almost every aspect of Chinese life, price is a critical factor. Consumers are generally thrifty,
and like to save money. What this means is that in many of China’s poorer and less developed regions
consumers often cannot afford to purchase packaged goods – particularly in the primary in primary produce
sector.
However, as overall growth of the Chinese economy develops and disposable incomes rise, a propensity for
conspicuous consumption is beginning to take shape as can be seen in the more affluent regions of the
country such as the east coast. This general improvement of living standards, coupled with burgeoning
consumer awareness, means that the potential growth of the packaging market in China’s primary industrial
centres is set grow at a rate far outstripping that of overall GDP growth.

As consumer awareness develops, and the Chinese move toward an increasingly consumption led lifestyle,
consumers are increasingly looking beyond straight functionality from product packaging. In the developed
markets f of China’s economic hubs – namely the Pearl River Delta (PRD), the Yangtze River Delta (YRD) and
the Bohai Bay) consumers are increasingly expecting packaging to incorporate considerations such as
aesthetics, and how the product communicates lifestyle messages to the consumer. For these reasons
packaging has until recently been primarily consumption driven – as opposed to technology driven.
OTC packaging has seen a dynamic performance in recent years, influenced by a number of issues, including
the gradual de-listing of medicines from the state medical insurance list, which meant that fewer drugs were
eligible for reimbursement. As a result, the trend for self-medication has grown creating additional
packaging demand for OTC products during this time.
Meanwhile, folding carton and blister and strip packs have shown rapid growth, increasing nearly twofold in
usage since 2000.
Growing from a low base, the Chinese plastic packaging industry has hurtled past film technologies due to
advantages such as light weighting. Furthermore, because small production facilities are able to produce
high-volume plastic packaging converting, small and medium-sized enterprises can compete in the industry.
As China gradually continues to replace glass and metal with plastic, the sector projects steady growth well
past 2008. Demand from food and beverage end-users has driven growth well past 10 percent annually,
unsurprising considering that the plastic industry comes from a low production base, requires more
sophisticated technology, and competes for feedstock with ‘priority industries’ in several fields.
Industry spending on plastic packaging equipment has grown steadily at 11 percent, a rate it projects to
maintain beyond 2008. By the end of 2008, China’s equipment budget exceeded USD 30bn, roughly three
times greater than 2000-2003 levels.
A decline in demand for locally produced alcoholic spirits led to relatively low aggregate growth in the
alcoholic drinks industry as well as a decline in demand for HDPE bottles, flexible plastic, and other packages.
Health awareness and a diminishing core consumer base contributed to this decline.
Flexible plastic at present dominates the packaged food sector, attributed to its low coast, efficiency in
preserving shelf life, and its malleability. Noodle and rice, bakery, and ice cream—all high volume products in
China—use flexible plastic, account for its impressive growth.
Many manufacturers have begun using flexible plastic packaging for goods that normally use more solid
material, such as milk and non-grape wine. While often not practical, use of flexible packaging helps
manufacturers widen their consumer base.

In urban areas, blister and strip packs have seen wider use in the packaging of confectionery products,
appealing to more upscale consumers who consider factors beyond price in their purchasing decisions.
Usage of blister and strip packs in pastilles, gums, jellies and chews has led to industry growth in recent
years.
Beer, which accounts for almost 75 percent of glass bottle usage, is the largest end-use application for glass
bottles within alcoholic drinks as a result of savings made by returnable bottles.
The arrival of high-quality, less-alcoholic spirits on the market could cause an upturn on pottery-based
containers, an industry expected to reach volumes of 1.4bn units by 2007.
The impressive growth of the soft drinks market has caused a 20 percent growth over the past five years in
the annual consumption of PET polyester bottles, within which hot-fill PET bottles proved especially popular.
Much metal and glass beverage packaging has given way to PET polyester in the ever-growing soft drinks
market.
Why are PET bottles so successful? In addition to being lightweight and unbreakable, PET bottles are also re-
closable, an advantage it holds over competing forms such as metal and glass. As health-oriented products
like Asian speciality drinks boomed in popularity, PET bottles likewise prospered. Should beer also deviate
from glass packaging, PET’s status stands only to improve.
Metal beverage cans, though, are not going away. Their use in juice drinks, seen as a healthier beverage than
carbonated soft drinks, as well as their trendy image among young people have contributed to their
enduring popularity.
In the non-food category, flexible packaging thrives due to its extensive use by the tobacco industry, whose
large size guarantees market dominance.
Pouches have a small but growing role in pet food and pet care products and household care. In pet food,
their ease of use and premium appeal in wet cat and dog food accounted for dynamic growth in recent
years. In household care, the successful application of plastic refill pouches in automatic liquid detergents
and fabric softeners is likely to pave the way for the application of refill pouch packaging in a number of
other categories, ranging from shampoo and liquid soap to bath additives and body wash/shower gel, much
like in Japan.
Pouches, used in pet food, pet care products, and household care, have grown in importance in recent years.
In pet food, their ease of use
In the cosmetics and toiletries field, glass has assumed a wider role as it is seen as a higher-end packaging
medium for goods such as nourishers and anti-agers. PET bottles have also become more popular in the

industry. To common products such as shampoos and facial cleansers, PET bottles convey a more aesthetic
image.
PET bottles also dominate the household care market, as they can provide differentiation in high-volume
product areas such as hand dishwashing, kitchen cleaners, and multi-purpose cleaners.
Technological developments have made liquid cartons more attractive in recent years, and as such economic
growth is expected over the next three years. The dynamic health-oriented beverage boom has also helped
liquid cartons immensely as they have been used in this industry. Furthermore, PET’s replacement of metal
beverage cans and glass bottles may ensure that its success will not be short-lived, as rigid plastic may grow
for longer than the next three years.
Environmental concerns and stricter legislation may also play a large role in the packaging industry.
Manufacturers have begun using more recycled content in their production, and products themselves have
become more easily recyclable. Biodegradable plastics are projected to grow at the expense of less
environmentally-friendly products.
Additional functionality and added convenience join improved safety as trends to watch in the food and
beverage packaging industry. For example, pouches that have handles and pouring spouts are being used to
boil water, making inroads in the soup and sauce packaging markets.
In general, package types of all sorts have a bright future in China given the country’s consistently surging
economy.
Because of its low cost and high versatility, flexible packaging will play a large role in the projected volume
increases of packaged food. As homes in China become smaller and consumers snack more, the future of
flexible packaging will remain bright for the foreseeable future.
• Output of paper packaging is expected to reach 19m tonnes this year creating an average annual increase
of 8%; in 2010 it will is predicted to reach 27m tonnes, an average annual increase of 7%, and in 2015
36mn tonnes, an average annual increase of 6%.
• Output of metal packaging is predicted to reach 2.88mn tonnes this year, an average annual increase of
7%; in 2010 3.85mn tonnes, an average annual increase of 6%; and 4.91mn tonnes in 2015, an average
annual increase of 5%.
• Output of glass packaging is predicted to reach 10.5mn tonnes, an average annual increase of 5% this
year; 12.7mn tonnes in 2010, an average annual increase of 4%; and by 2015 15.5mn tonnes, an average
annual increase of 4%.

• Output of plastic packaging is predicted to reach 5mn tonnes, an average annual increase (8%) by the end
of 2005; in 2010 7.07mn tonnes, an average annual increase of 7%; and 9.46mn tonnes in 2015, an
average annual increase of 6%.
• Output of packaging machinery is predicted to reach 670,000 racks, an annual increase of 8%; in 2010
930,000 racks, an average annual increase of 7%; and 1.2mn racks by 2015, an average annual increase of
6%. Machinery in greatest demand is likely to include bag making, filling-sealing packaging machinery,
corrugated paper carton production equipment, metal packaging container processing equipment, pulp
and moulding processing equipment, and vacuum packaging equipment

The table below gives actual production figures to 2003 and estimated figures from 2004 to 2008.
China’s Packaging Products Output Value (USD billions)
USD billions 2001 2002 2003 2004 2005 2006 2007 2008
Paper Packaging 15.58 17.12 18.81 20.67 22.72 24.76 26.99 29.42
Plastic
Packaging
3.62 4.07 4.57 5.14 5.78 6.41 7.12 7.90
Glass Packaging 5.41 5.76 6.12 6.51 6.93 7.35 7.79 8.25
Metal Packaging 2.21 2.40 2.61 2.83 3.08 3.33 3.59 3.88
Others 1.66 1.67 1.68 1.69 1.70 1.71 1.72 1.73
Total Value 28.48 31.02 33.79 36.84 40.21 43.56 47.21 51.18
Source; CPTA: 2001 and 2003 are actual production value figures, 2004 to 2008 are estimates

6.3 Paper packaging industry
6.3.1 Paper packaging
Efforts by the Chinese government to implement restraints on overheating industries and to reduce fixed
asset investment did not curtail paper packaging industry growth in 2004. Paper and paperboard
consumption rose to 54.4mn tonnes and production volume reached 49.5mn tonnes, trailing only the US.
The government also plans to invest CNY 490bn into the sector between 2001 and 2015, an average of CNY
32bn per year.
Corrupted paperboard consumption likewise is projected to reach 15mn tonnes in 2005, partially causing an
estimated 10mn shortfall in the paper-pulp supply that year.
While Chinese paper industry output accounts for 10% of world output, second only to the US, China still
imports a large number of paper products.
6.3.2 Industry development
The paper packaging industry is developing well; by 2010, industry volume is projected to reach 27bn tonnes,
even with Chinese macroeconomic restraints. Consumption is expected to reach 70mn tonnes by 2010 and
100mn tonnes by 2020, a figure matching projections for the US market.
New machines intended to increase production, as well as measures intended to improve existing machines
could spur even faster industry development.
While China is a major consumer in the aggregate, its per capita consumption is only about half of the global
average at 30 kg/year. Machine-made paper and paperboard output is forecast to reach 39.2mn tonnes by
the end of 2005, with a compound annual growth rate (CAGR) of 4.8 to 5.9%.
With market reforms and the emergence of a robust capital market, China’s pulp and paper industry ranks as
one of the world’s most dynamic. Once dominated by state interests, less than a quarter of companies in the
industry have a government stake in ownership.
Opportunities in the market abound. As more paper and pulp manufacturing shifts to China, demand for
packaging material will soar. Domestically, demand continues to grow especially in the coastal regions.
Modern facilities will eventually replace small, local mills producing paper from straw, further offering
growth potential. As domestic production replaces imports, opportunities for Western producers will only
increase.

The following table shows the major paper product forecasts for 2005.
Products 2000 2005
Newsprint 1,450 2,300
Paper used for writing, printing 7,600 10,000
Paper used for living 2,500 3,200
Paper used for packing 4,200 4,600
White paperboard 2,500 4,000
Carton board 3,700 6,400
Corrugating medium 5,500 7,200
Specialty paper and paperboard 600 1,500
Source:CBS: (Units 1000 tonnes). Figures for 2005 are estimates
Widespread consolidation within the fragmented Chinese paper industry should cause the emergence of
large paper manufacturers, causing productivity and overall production capacity increases as well as a
reduction in employment. These changes will aid industry productivity and efficiency.
The printing industry, the main customer of the paper industry, is developing quickly, boosting demand for
certain types of paper.
Structural problems remain. The paper manufacturing industry has an unrationalised industrial structure,
and distribution remains scattered. Pulp and paper manufacturing was once measured for local demand,
limiting the production capacity of various enterprises. Not all paper companies are similar, either; their
scale and technology vary greatly.

Manufacturers have also felt pressure from new environmental measures forged by an increasingly-attentive
government. China has published a series of new environmental protection regulation that will require paper
manufacturers to upgrade equipment and technology to meet new standards. Foreign companies salivating
at the prospect of entering the paper manufacturing market need also be aware of these difficulties and
risks.
Foreign companies considering entering the paper market in China must plan for their fibre supply. China’s
fibre shortage makes the industry reliant on imported pulp and waste paper. While this fact pleases global
producers wary of pulp overcapacity, companies pondering production in China must be prudent.
6.3.3 Chemicals in the Chinese paper industry 2005
Demand for pulp and paper chemicals in China have grown rapidly in the past decade, and continued growth
over the next five years at 7.5% annually is projected. By 2010, the Chinese market in pulp and paper
chemicals is expected to reach 8.16mn metric tonnes. As such, China is likely to remain a major exporter in
the industry throughout the century.
Pulp and paper imports, too, will continue in China as top grade products supplied by the domestic market
are inefficient. By the year 2005, pulp and paper chemical imports are expected to grow by 8.9% annually to
just under 500,000 metric tonnes, roughly 90% of export value. Needless to say, the pulp and paper
chemicals industry will remain a hot spot for foreign investment in coming years.
6.3.4 Paper packaging products
Products that helped create surging demand for paper and pulp in recent years include:
• Shopping bags, including carrier bags, gift bags, and other shopping bags
• Packaging of food, grain and animal feed, mainly for flour, grain, animal feed, sugar, starch, French
bread, roasted chicken as well as air sick bags and even cook caps
• Packaging of building materials and chemicals, mainly for cement, chemicals, dry mortar, etc
• Carton boxes, including gift boxes, accessory boxes, and all sorts of colourful boxes
• Kraft paper cases
• Kraft Paper displays
• Paper towels and napkins

6.3.5 Paper and the paper product import market
China imports several million tonnes of paper and paperboard annually. Demand for high-intensity
corrugated raw paper is especially high, and with consumption increasing fast and domestic supply lagging
this situation is unlikely to change over the next several years. Import values continue to increase, and a
shortfall of 1mn tonnes is projected for2005.
Due to decreasing tariffs, the proportion of imported products in total consumption is projected to rise
gradually to 25% by the end of 2005. China ideally would like to reduce its dependence on imports by
developing indigenous resources and encouraging foreign investment to bolster domestic paper production.
Main import products in 2004: Paper pulp, paper and paperboard, newsprint, brown paper, corrugated raw
paper, inorganic daubing cloth paper, machinery and spares used in paper and paper product production.
6.3.6 Food processing & packaging (P&P)
Modern, fast-paced lifestyles and increased disposable income have changed traditional eating patterns,
increasing dependence on packaged and processed foods. As a result, the P&P industry is now China’s third
largest of any kind.
The China Packaging Technology Association estimates that industry output will reach RMB 320bn, an annual
increase of 8%, by 2005. However, outdated and unsophisticated machinery, machinery shortages, and
other factors explain industry underdevelopment.
In response to the growing need for a complete upgrade of the food processing industry, the number of
domestic enterprises devoted to the production of food processing and packaging machinery has risen
dramatically, of which almost all enterprises are small to medium sized. Although a large number of P&P
machines can now be produced in China there is still a significant market for foreign machine manufacturers.
A large number of companies devoted to food processing and packaging have cropped up in China,
responding to a need for the complete upgrade of the industry. While a great number of P&P machines can
be produced domestically, foreign manufacturers will still have a lot of opportunities in the industry.
Future development of China's food processing sector will be constrained by the following major factors:
• Poor management.
• Inadequate logistics.
• Low levels of technology.

• Lack of capital for small and medium sized enterprises to purchase cutting-edge food handling and
packaging machinery from abroad.
In a sense, the P&P industry faces a Catch-22; it needs foreign capital through exporting processed foods, yet
it cannot generate enough capital to produce food meeting worldwide standards.
6.4 Plastic packaging industry
Plastic packaging consumption reached 54mn tonnes in 2004, and current estimates forecast that plastic will
surpass paper packaging by 2008, necessitating an annual increase of 3%.
Plastic packaging dominates the industrial goods market in China. More than half of the country’s annual
output of cement is transported in woven plastic bags, as supplies of paper and jute are inadequate. Further
demand for plastic packaging is generated by primary industrial goods like mineral and chemical products,
synthetic resin, crude salt, sugar, cotton, and wool.
China presently can produce a many different kinds of packaging film, including BOPS sheets, CPP film, three-
layer, five-layer and seven-layer co-extruded films, vacuum aluminium-plated films and other composite
films, high-barrier PVC casing films, and coated films.
The industry also produces beverage containers and various hollow containers of diversified, foamed
plastics, extrusion web, extruded foamed sheets, and vacuum forming plastic products.
China remains one of the world’s largest grain producers with an annual output of 500mn tonnes, indicating
an enormous need for plastic agricultural packaging. Changing lifestyles—and a corresponding change in
Chinese eating styles—likely will also foster increased demand in the quality and variety of packaging
materials. Fractional-package grain, for example, has become fashionable in certain cities.
The fast-growing food, beverage, medicine, cosmetics, and scour industries will create substantial demand
for composite membrane, packaging film, containers, and reusable containers.
Experts in the field expect that the future research and development in plastic packaging will focus on
improving the barrier property, high and low temperature resistance, and photo-degradation property of
plastic materials. Improvements are possible through innovations in plastic packaging processing techniques,
like physiochemical properties as air tightness, light transmittance, resistance to erosion, preservative
quality, and aging resistance.
Synthesising and extruding techniques, high barrier-property materials, and multi-functional packaging like
preservative packaging, high-temperature resistant film and electrostatic prevention materials, BOPE—
whose high transparency makes it suitable for wet-synthesising with other materials—and low-temperature

heat-sealing have also established themselves as matters of importance. Experts have also directed
attention to the domestic development of edible packaging.
Material in plastic packaging has grown rapidly in the last 20 years and has assumed an important role in the
China packaging market. Technology in the field has progressed markedly to levels of more developed
countries, and demand for material continues to grow at an impressive 12% clip. Meanwhile, new products
keep emerging.
6.4.1 Industry trends
A significant trend in plastic packaging has been the use of BOPP and BOPET film in a march towards
diversification, higher quality, and symmetrical lamination. Applications have continued to expand in
markets like printing, lamination, coating, adhesive tapes, cigarette packaging, pearlescent film packaging,
and vacuum aluminium plating. Capacitors and metal-filmed containers are also applications.
BOPA film, with its good barrier performance and puncture and fluid resistance, is ideal for retort pouches
and cold-vacuum packaging of fresh meat, cooked hams, and flavoured food. In 2005, production capacity is
projected to reach 20,000 tonnes.
Composite Flexible Packaging Dominating the Market
Currently, plastic packaging material is tending toward high performance, versatility, and environmental
friendliness.
Within the plastic industry, high-performance multi-functional plastic material—which includes a large
variety of plastic packaging materials like high-barrier and multifunctional freshness-preserving film—has
emerged as a key highlight. In particular, high-barrier and aseptic packaging have undergone remarkable
growth in recent years.
High-barrier multifunctional film is targeting higher-level development, as technical progress in inks and
adhesives have triggered multi-functional packaging materials. In response, the traditional composite film
industry now aims to produce films of higher-standards, larger scale, and better effect, a significant set of
reforms. International standard high-precision roller scanners, platform-level scanners, and leading plate-
making equipment have replaced conventional plate-making processes, a major reform. Packing film
development has also resulted from offset, gravure, flexo, and silk-screen colour printing systems, all
currently a major part of bag-making equipment. In addition, tamper-evident packaging film has undergone
regular growth and has become a key focal point in plastic packaging.
Two trends--rapid economic growth and environmental consciousness—have resulted in technological and
product enhancements. Consumers now have higher requirements for daily goods packaging, food

packaging, and industrial packaging, all the while minimising waste. Manufacturers, in response to these
demands, have focussed on making films and containers lighter and thinner.
Ultra-tough, easy-to-process, and ultra-thin film materials have emerged as the key element in responding to
these trends. Materials such as Borstar PE, metallocene PE, PP and polystyrene alloy have produced a
greater variety of choice for plastic packaging, allowing co-extrusion technology for packing film and
container to develop. Further developments have included changing the dry-laminating method focussed on
bi-directional stretched materials, adoption of co-ex lamination, and rationalising the structure of flexible
plastic packaging. E-layer co-extruded (LLDPE and PP) heat-shrinkable films, in this way, have undergone
greater development.
Demand for co-extruded film by supermarkets and groceries is projected to increase by 50% over the next
four years. As one of the world’s largest agricultural powers, China produces more than 73mn tonnes of
vegetables and 50mn tonnes of fruit each year in addition to large amounts of grain products, pot foods,
local flavoured foods, and aquatic products. This—coupled with the fast growth of supermarkets, is to create
promising opportunities for the development of high-barrier multifunctional co-extruded films.
Of all heat-shrinkable packaging material, film is highly recommended on the international market, whether
co-extruded by LLDPE (as a middle layer) and co-extrusion-grade PP (as outer layers), the material features
several advantages. Single-layer film, for instance, has found a home in sectors including fast food, ceramics
products, tea utensils, and machine parts.
Heat-shrinkable film also has applications in the military machines and metallic tools sectors; heat-shrinkable
film with gas-phase antitrust technology substitutes for coating and antirust oil, allowing guns and springs to
enhance their antirust capabilities. Multi-layer heat-shrinkable film have also penetrated sectors such daily-
use goods, health products, medicine, stationery, cosmetics, and A/V products.
Wraparound plastic film, better known as elastic film or wrapping film, derives from LLDPE and is a
copolymer of ethylene and hexylene or caprylene. Within China, ethylene-butylene melt with 1-2 in melt
index and 0.98 density is most prevalent. In process, China has adopted blow moulding and casting
processes that can be produced on single-layer casting equipment or three-layer co-extrusion casting
equipment.
Wraparound film also offers several advantages unique to packaging film: self-adhesion, the elimination of
heat-shrinking treatment in the packaging process, the reduction of energy consumption and packaging
costs, the wrapping into one single unit, the ease of loading and unloading, the promotion of transport
efficiency, and the reduction of transport costs by using “integrated loading and unloading” methods
integrated with pallets and trucks.

The use of plastics in aseptic packaging augurs well for the latter industry, which could develop rapidly.
Aseptic packaging takes sterilised foods, such as beverages or dairy products, and encloses them in sterilised
containers, providing a lengthy shelf life without preservatives or cold storage. While non-aseptic packaging
takes packages and sterilises them along with containers, aseptic packaging sterilises products by instant
ultrahigh-temperature or microwave sterilisation, a process that requires less than 20 seconds and
minimises loss of nutrition and flavour. Aseptic plastic packaging packs and cups have both grown
considerably in China in recent years.
These aseptic packaging packs refer to 5-220L (1,000L maximum) laminated film bags that are placed in
wooden crates, cartons, or steel barrels and used for tomatoes, fruit juices, and syrup packaging. Most of
these packs are made with PET aluminium-coated film and PE.
Aseptic packaging cups, meanwhile, use multi-layer co-extruded sheets—including PP, PE, EVA, PVDC, and
PS. During the packaging process, when PP is stripped off the aseptic PE surface is exposed and completes
the entire moulding, filling, and capping process. EVA serves as the adhesive layer while PVDC is used to
package food in order to achieve longer shelf life.
At present, the Chinese aseptic packaging market accounts for only 5% of the beverage packaging market
and 10% in the dairy product packaging market, far less than the average figure of 65% seen in developed
countries. However, per capita milk consumption at 5.1kg is nearly 5 times less than the global average while
fruit juice consumption also ranks far below global standards.
Logistical problems—an estimated 20% of produce is lost or damaged in the process of storage, transport,
and marketing—has been a major obstacle to the Chinese fruit and vegetable market. Packaging ensuring
the safeguard of fresher products thus will be forthcoming.
Currently, PE and PP films remain dominant in the fresh fruit and vegetable packaging sector. Different fruit
and vegetables differ on freshness-preservation packaging requirements. In general, the choice of film bags
depends on the following considerations:
• Optimal breathe-ability to maintain O2 and CO2 concentrations at ideal level.
• The addition of an ethylene gas absorbing agent. In the after-harvest maturing process, fruit releases
ethylene gas and generates plant-growth hormones. The build-up of ethylene in packaging bags may
accelerate the fruit aging process and reduce shelf life. To solve this problem, it is required to add
porous substances such as silicon elements (zeolite, oyamycin, cristobalite and SiO2) in the film-
production process to absorb ethylene and thus keep it fresh.

Beverage production in China is growing at 20% per year. Within the carbonated beverage packaging sector,
which continues to offer bright market possibilities, PET bottles maintain a market share. The two largest
PET polyester bottle producers in China are Zhuhai Zhongfu and Shanghai Zijiang Group, enjoying market
shares of 30% and 20% respectively.
A latecomer to the plastic packaging industry, the polyester bottle has enjoyed rapid growth and has won a
large market following from customers due to the wide introduction of injection-stretch-blowing (ISB)
equipment. Within a few years PET bottles began dominating the edible oils and beverage packaging bottle
industries, and at present enjoy the highest growth of all plastic packaging materials. Sectors such as
cosmetics and medicine, likewise, have begun using polyester bottles more extensively. China’s massive tea
beverage industry has also helped increase market visibility.
The arrival of PP clear packaging bottles shook up the Chinese plastic packaging sector. With the
development of transparency modifiers and nucleating agents, PP clear bottles have added application in
thermoform containers and food and drug bottles. These bottles are of reasonable price and promise
enormous market opportunities as a competitor to PS, ABS, PET, and PE bottles.
Use of PET packaging bottles has skyrocketed in recent years. The development of PET bottle coating
technology, coasting a 0.21mm carbon on the inner surface provides a barrier capability as does glass and
can manage superheating, expanding its versatility and making it suitable for packaging hot-tea beverages.
New-type polyester packaging has also become tremendously important in beer packaging, as the persistent
problem of beer bottle explosions forced innovators to seek new solutions. PEN and PET packages share
similar molecular structures; therefore with a benzene ring rather than a naphthalene ring, PEN will have a
better barrier, higher UV stability, and better thermo-stability than does PET. PEN, though, does cost five
times that of PET, preventing its more widespread use.
Recently Zhuhai Zhongfu has expanded its research with high-priced investment into the development of co-
injection technology and bottle-blowing technology, both efforts to extend preservation of beer to 100 days.
Having experimented with 350ml and 500ml PET bottles and in the process of manufacturing 1.5L to 2L
bottles, the company has invested in a large new plant that is expected to spur faster growth.
Purified drinking water bottles are ubiquitous in Chinese households, with many families opting for the 5-
gallon barrel that is dominated by PC, PVC, and PET packaging. However, the latter two have caused some
concern; PVC drinking water barrels have reported toxic additives, while bacteria levels in some PET drinking
water bottles have tested as unacceptably high. One survey revealed that over half of barrelled purified
bottled water in some parts of China was substandard, attributable to substandard materials used in the
barrelling process.

As a result, the need for food-grade PC materials has become pressing. Shanghai has signed an agreement
with Bayer to construct a 10,000 ton PC resin plant. The Phase I of the project was commissioned in 2003
with an output of 50,000 tonnes, potentially alleviating long-standing demand for imported PC. Production
facilities in Shanghai and Guangdong alone have produced more than 50mn barrels, attesting to the quick
growth of massive potential of the market.
Bottled water accounts for about a quarter of overall beverage output at 5.5mn tonnes. Competition within
the Chinese market has fostered some robust enterprises like Wahaha, while the range of available products
have expanded into distilled water, activated water, oxygen-rich water, and space water. Further
development is in the works.
Accordingly, the market is imposing higher requirements on the quality of packaging bottles, a market sure
to explode in future years.
The presence of toxic agents registers as a major concern in the food packaging industry, particularly
packages that come into direct contact with food. Films made of materials such as OPP, BOPP, PET and PS
have gradually replaced PVC, and these too may come into competition with edible packaging, the latter
having become quite popular recently.
Plastic, the most popular packaging material of any kind, has experienced ever-increasing popularity in the
field, a trend likely to persist for the foreseeable future.
6.4.2 Industry needs
Environmentally-friendly cement has arrived from overseas and has entered the China market, having been
introduced into 30 non-solvent lines. Though consumption of non-solvents has gradually increased, supply is
yet to meet demand and costs remain high.
Anti-staling film, used to prolong storage life, has undergone a rapid increase in demand, exacerbated by the
increasing prevalence of microwave ovens in Chinese homes.
Flexible packaging materials, once the exclusive domain of food packaging, is now used in industry
packaging, medicine packaging, building material packaging, and cosmetic packaging—with further
applications likely in the future.
Demand for coextru-film, used for food sundry packaging in supermarkets, is projected to increase by 50%
over the next 3 years, including 2005. The development of agricultural exports indicate tremendous
opportunity for high-intercluding and multi-functioning coextru-film.

6.4.3 Packaging printing
Printing business across the sector have diversified and developed alongside China’s packing industry. Due to
the relatively low technological levels within the sector, any changes bring vast potential to the market.
Investment, though, has failed to keep up with the industry as a whole, preventing development from being
even more impressive as a whole.
By 2000, the Chinese packaging industry was a mixture of several different types of enterprises, including
state-owned, collective, private, joint-stock, and different kinds of foreign-invested businesses. More
recently, trends within the industry indicated that packaging is moving to a more conventional orientation,
with rapidly increasing competition. This detail shows the increasing maturity of the industry, particularly in
regards to enterprise management.
Main industry problems:
• Uneven development and evident gaps between East and West China.
• A substantial shortfall in creativity, and design.
• A lack of innovation and qualified personnel.
• Excess capacity at the low-tech end of the market, under capacity at the high tech end.
6.4.4 Packaging printing machinery industry
China’s demand for printed products and by extension printing materials and printing machinery has surged
in recent years. As a result, the printing industry and printing equipment industry has developed fast.
The import and export volume of printing equipment and printing material has risen rapidly in China and
there is currently a strong demand for imported high-grade printing equipment and printing material.
Advancements in the material level of the packaging industry have resulted from technological
improvements in printing as well as a growth in sales. Strong competition and industrial realignment have
stalled the industry somewhat; low-profit has recently been the norm.
Gradually, supple-printing machines in China will convert to wide-satellite size, despite its higher price than
narrow-set. Decisions based on competitive pricing, thus, are becoming more common.
In equipment upgrades, after-sales support is likely to become a very important factor in purchasing
decisions, as firms with the most advanced technology and technical support are favoured.

At present, the industry is attempting to develop international paper-case printing technology and creative
printing machinery equipment. In the latter years of the 20th
century, Chinese paper-case machinery industry
experts travelled abroad to study the industry in several developed countries, such as Japan and the US.
Corrugated paper-case printing is developing to high levels and is almost meeting domestic and foreign
demand placed.
6.4.5 Digital printing
Already used in package label design and the production of commodity labels for food, beverages, and other
products, digital printing enables direct plate making via computer without the use of film in the pre-
pressing process. In addition, digital printing plays an important role in flexible packaging, adding to a sense
that demand for digital printing will develop right alongside the Chinese economy as a whole, or perhaps
even more quickly as digital printing overcomes traditional means. This day remains in the future, though—
at present digital printing comprises only a small percentage of the overall market.
6.4.6 Ink
Environmentally-sound inks have attracted increased interest from printing producers, as the industry’s
growth rate is projected to exceed GDP growth. Well-known international ink firms such as Toyo, Sakata Inx,
Dic, Flint, and T&KTOKA have already invested in China.
6.4.7 Metal packaging
Metal packaging products, including cold and hot rolled-late, are estimatd to reach 2.8mn tonnes in 2005
with an overall output value of USD 3.08bn, with further development in terms of specialisation and
integration expected. Primary products within the industry include aluminium tow piece cans, tinplate-three
piece cans, spray cans, pop-top cans, 20 to 200 litre steel barrels, and more.
With an overall output comprising 10% of the packaging industry as a whole, metal packaging remains an
important part of the industry. The industry primarily deals with foodstuffs, cans, beverages, chemical
engineering, medicine, and cosmetics.
At present, technical levels within the industry have reached a relatively advanced level. There are at present
26 complete double-sheet can production lines, and production capacity is over 11bn units per year,
although present market demand is only 7bn. There are over 500 tin plate tri-sheet production lines, a mix of
both foreign and domestic models, fully-automatic and semi-automatic, and the products supply the
beverage industry with about 4bn units a year and the food industry food with about 3.8bn units a year.
There are nearly 300 complete crown-cap production lines in China, over 90% of which are foreign
manufactured. Furthermore, there are 500 lines of metal printing instruments printing more than 16bn units

a year. Altogether total demand for tin plate is 1.40mn tonnes. With tin plate productivity improvement in
China imports will decrease gradually to almost self-sufficiency soon, however some high-quality products
will still be needed for import for the foreseeable future.
There are also more than 300 complete crown-cap production lines in China, of which 90% are foreign
manufactured. 500 lines of metal printing instruments print more than 16bn units per year, contributing to a
total demand for tin plate of 1.40mn tonnes. Tin plate productivity improvement will ease Chinese demand
on imports within the industry, and self-sufficiency is a feasible goal with the exception of certain high-
quality products.
With an annual per capita amount less than 1.5 kg, tinned food consumption in China is very low; by
comparison, consumption in Japan equals 23 kg and Europe 50 kg. Supply is greater than demand in the
metal packaging market, and as a result per capita consumption growth is the focus of industry development.
The food and drink industries are the biggest users of metal packaging in China, followed by the chemical
engineering sector and then cosmetics and medicine. As living standards, consumer choice, and related
industries grow in the country, metal packaging is likely to follow suit. Manufacturers of drinking products
are developing a number of new brands, and double sheet and tri-sheet cans have proven to be competitive,
particularly in the beer, chemical, engineering, petrol, medicine, and cosmetic sectors.
Major obstacles in the sector include:
• Insufficient administrative macro-control
• Disordered competition; SOEs and industry subsidies create market distortions and confusion.
6.4.8 Glass packaging
China’s market for glass purchasing—including bottles, jars for food products and beverages, and flasks for
perfume and pharmaceutical products-- has enormous potential. Industry output value in 2005 is forecasted
to be USD 6.93bn, though supply is in danger of not meeting increased demand. The construction,
automobile, electronic, electrical appliance, information, and pharmaceutical industries in particular have
enormous needs in the glass packaging sector.
A series of reforms enacted in recent years have spurred development in the Chinese glass packaging
industry, though output growth rates are low and profits have yet to become realised. While some
competitive domestic enterprises have emerged such as Qingdao Jinghua Glass Co., foreign-funded
enterprises, joint-venture enterprises, and private enterprises are likely to play a major role in the industry.

Industrial technology has made much progress in certain areas of the industry, though uneven distribution in
technological access has caused disparities throughout the industry. While progress has been made in
product structure, efficiency, technological input, product quality, and artistic design all lag behind other
sectors within the packaging industry. In terms of consumer safety, anti-impact and sub-standard internal
force-resistance remain areas of concern.
The price of energy could present a significant problem to the industry. Energy accounts for 40% of
production costs in the glass packaging industry, and while energy is presently priced as a commonwealth
good—meaning below market value—inefficiency, waste, and energy shortages in the future could lead to a
rethinking of this policy. Any change in energy prices would have a major effect on the industry.
6.4.9 Future developments
The immediate goals of the industry in the near future are to greatly improve quality, safety, aesthetic
content and versatility of product design, to raise productivity, efficiency, and the technical level of the
industry in terms of both product and fixed capital assets by importing advanced foreign production
capacity, and to reduce the industry’s dependence on energy and hence environmental impact.

6.5 Packaging machinery
6.5.1 Industry overview
China’s rapid industrialisation has occurred across a broad array of industries, and manufacturing still
accounts for 60% of GDP growth over the past decade. The packaging machinery is no exception.
The table below shows global packaging machinery demand and relevant countries.
Global Packaging Machinery Demand (% annual)
Item 2003 2008 2003-2008 (%)
Global packaging machinery demand 24,800 31,650 5.0
China 2,600 3,970 8.8
United States 5,470 6,750 4.3
Western Europe 5,970 7,310 4.1
Source; CPTA (Units USD mn)
The packaging machinery industry, largely due to government support, is expected to grow at an average
annual rate of over 20%. However, domestic supply cannot meet the needs of the industry, necessitating the
import of advanced technologies and equipment.
China has become the second largest importer of packaging machinery worldwide, with annual imports
totalling around USD 2bn. Output of packaging machinery is expected to reach 670,000 sets in 2005 and
930,000 sets by 2010, evidence of industry focus on developing industrial and product reconstruction.
The total domestic demand for food machinery and packaging equipment will reach approximately CNY
65bn (USD 7.9bn), with an annual growth rate exceeding 12 percent over the same period.

The packaging machinery industry is one of the ten biggest machine industries in China, which has been one
of the biggest producers and users of packing machines. However, there are still many problems facing the
domestic packaging machinery sector. These include:
• A shortage of macro-adjustment and control leading to disordered competition and inefficiencies within
the industry
• Lack of investment. Due to a general shortage of funds, investment in research and development only
accounts for 1% of the average level of sales value, making it very hard for enterprises to innovate
technologically
• A shortage of professionally skilled persons
6.5.2 Competitor analysis
China imports much of its equipment from neighbouring nations in the Asia Pacific region, with Japan being
among the more successful due to its proximity to the market and wide experience in the sector. The
following is an analysis of China’s primary competitors within the packaging machinery supply sector.
Japanese suppliers
While Chinese consumers consider Japanese products to be overpriced for their quality, they do praise the
after-sales services of Japanese companies and the companies’ willingness to customise equipment to
customer specifications. The success of Japanese suppliers in China is due to the following reasons:
• Well-versed in Chinese culture and customs
• Geographical proximity to China (especially helpful for product exposure and after-sales service)
• Thorough understanding of the status and needs of the industry through extensive market research and
familiarity with Asian foodstuff
• Flexible sales approach; a willingness to customise equipment, superior after-sales service, a willingness
to assist Chinese buyers with purchase financing problems, and flexible finance agreements
• Advertising is well targeted and culturally appropriate
• Often approach market as part of a consortium
• Well represented at trade seminars and exhibitions
• Willingness to enter into joint ventures with Chinese manufacturers and engage in technology transfer

European suppliers
European machinery manufacturers have had a strong presence in the Chinese market for many years. The
majority of these companies are from Germany, Italy, and Scandinavia.
European companies benefit from experienced industry contacts within China and their flexibility towards
the market, as well as attractive financing packages with government loans. Euopean companies tend to be
well-represented at industrial seminars and international trade exhibitions partly due to government
subsidies.
Taiwanese suppliers
While producing goods of relatively low-tech value and of mediocre quality, Taiwanese companies are
popular in the Chinese market due to the inexpensiveness of their equipment. Chinese firms are typically
more willing to purchase low-quality products if they happen to be inexpensive, owing to the lack of
resources present on the mainland. Taiwan controls about 16% of imported food handling and packaging
machinery in China.
USA suppliers
American food and processing machinery exporters have long struggled to make inroads in the Chinese
market, due to the following reasons:.
• Lack of familiarity with the market's needs
• Insufficient participation in exhibitions
• Insufficient participation in trade seminars and delegations
• Unsatisfactory after-sale service
• Lack of understanding of Chinese culture and customs
• Unwillingness to customise equipment to suit buyers' requirements
• Inflexible financing terms
• Unwillingness to enter into joint ventures with Chinese manufacturers
• Minimal advertising in Chinese language
• Lack of consortiums for total solutions when approaching the market

Some well-known packaging suppliers in the China market:
• KHS Maschinen-und Anlagenbau AG
• Hofliger Verpackungsmaschinen GmbH, Harro
• Romaco AG
• Rommelag Kunststoff-Maschinen Vertriebsgesellschaft mbH
• Mettler-Toledo Garvens GmbH
• Siemens AG, Automation and Drives, Motion Control Systems
• Rockwell Automation
• Videojet Technologies, Inc.
• KRONES AG
• Rieckermann Pharmatech Limited
• Lachenmeier A/S
• Bizerba GmbH & Co. KG
• MSK Verpackungs-Systeme GmbH
• Unifill S.p.A.
Domestic competition
The presence of domestic manufacturers and foreign-based companies has enlarged in the Chinese
packaging market, as many Chinese companies mature and foreign multinationals attempt to tap China’s
enormous potential.
While prospering in the Chinese market may not yet be easy, there are certain ‘tricks to the trade’. Entering
into a joint-venture arrangement with a local firm reduces initial sunk costs and contract bid expenses. In
any sort of enterprise, local knowledge is crucial and allows foreign firms to sharpen their competitive edge.
As the Chinese market matures and more consumers value high-quality goods—even at higher expense—
opportunities may proliferate for foreign players.

Chinese producers still dominate the low-end technology market, though issues such as poor management,
a lack of foreign capital, increased demand for high-end technological packaging, and product competition
has limited the clout of domestic players in the market. However, the domestic industry only stands to
develop in the future.
6.5.3 Opportunities for international firms
Firms within China usually prefer to purchase less-sophisticated machinery from domestic sources to save
costs, meaning that opportunities for foreign firms exist in the complex, high-performance machinery
market. While price always remains the ultimate consideration, many Chinese firms have expressed a
willingness to pay a 5 to 10-fold premium for foreign manufactured products deemed high-quality.
At present, foreign-made packaging machinery operate more quickly, efficiently, and reliably than do their
Chinese counterparts, making them preferable for all but the simplest applications. A reduced need for
manpower and maintenance further explains the domestic interest in imported machinery.
Overall, packaging usage in China grows at about 20 percent annually, and food packaging machinery
imports continue to grow as well. Some promising areas include:
• filling/closing machinery (including bottling or can-sealing machines) which constitutes about 50% of the
total packaging equipment market;
• packing/wrapping machinery which constitutes about 30% of the total packaging equipment market;
• parts with a market share of about 15%.
Increasing demand in China for high-quality packaging provides tremendous opportunities for international
firms. According to China Customs, the quantity of packaging machinery imports (HS 8422) has grown in
recent years while the sub-sectors of packaging/wrapping and parts for packaging machines has also
increased, as have imports for parts of packaging equipment (HS 842290).
Disperser packaging has become the most popular form of packaging in the pharmaceutical industry, while
medicine factories have the following expectations about the mode:
• Disperser packaging equipment must be fully integrated and have precision control. For example, firms
must be able to link disperser packaging equipment with multifunctional boxing machines in order to
form packaging manufacturing lines.
• There is demand for new disperser packaging modes, including wallet packaging and packaging
convenient for olds and paperboard disperser packaging.

• Heightened sufficiency of on-line testing to promote end product qualifying rates.
• Pharmaceutical manufacturers are attempting to simplify the procedure and hasten packaging speed to
promote final production rates.
• Medicine factories also want anti-fake label packaging.
Additionally, China is increasingly using honeycomb paperboard packaging instead of wooden crates which
also provides opportunities for international manufacturers of honeycomb paperboard packaging
equipment.
Machines in greatest demand include:
• Complete sets of corrugated paperboard paper box making printing. At present a very large number of
products, such as bicycles and fruits, are packed with paperboard motorcycles, while vegetables are
reportedly switching to the mode in increasing numbers as well
• Machines for medicine processing and packaging; complete sets of all kinds of medicine processing
machines, especially high-speed, automatic and multifunctional packing machines and necessary
composite packaging material.
• Complete sets of ready-to-serve food production machines. The sets are mainly for instant noodles,
porridges, dumplings, and buns.
• Complete sets of beer and beverage’s filling machines especially high-speed, low spoilage/damage,
precise measurement, multifunctional, fully automatic machines
• Processing and packaging machines for fruits and vegetable processing and freshness preservation
• Edible oil processing machinery
• Fruit and vegetable processing machinery
• Meat product processing machinery
• Milk product processing machinery
• Convenience food processing machinery
• Beer and beverage processing machinery
• Super-micro-particle pulveriser machinery

• Extrusion moulding machinery
• Vacuum freeze-drying packaging machinery
• Micro-capsule packaging machinery
• Germicidal curing agent packaging machinery
• Anti-stailing packaging machinery
Other needs:
• Bag forming-filling-sealing equipments/machines
• Complete sets of beer and beverage’s filling equipments/machines
• Measuring/filling equipments/machines
• Wrapping and packing equipments/machines
• Tying and packing equipments/machines
• Aseptic/antiseptic sterile packing equipments/machines
• Vacuum and ventilation packing equipments/machines
• Corrugated paperboard production equipments/machines
• Metal can production equipments/machines
• Environmentally friendly packing equipments/machines
• Paperboard production, carton production, paper box production and whole set printing equipment
• Bag forming, filling and sealing equipment
• Strip packaging equipment
• Automatic packaging equipment
• Whole set can production
• Heavy bag packaging equipment
• Food heat insulation packaging paper

• Encasement equipment and carton equipment
• Farm product deep processing whole set equipment
Materials in demand:
• Degradable plastic: PTT from microbes, PET, PVA, PEN, BOPS
• Flexible plastic: VMCPP, PE
• Composite material: PEEK, PECK, PPS, BMC
• Paper packaging: metal paper
6.6 End-user analysis
Historically, most end-users in the food processing industry are small to medium-sized enterprises without
the ability to obtain foreign exchange. Many of these companies used Chinese trade fairs to find new
machinery. Their lack of foreign exchange resulted in a calculus by which end-users must sacrifice quality
and efficiency for lower costs. This trend, however, may be changing; more Chinese end-users have
developed an interest in obtaining higher-quality goods even if costs are much higher.
State-owned factories (SOE):
The vast majority of state-owned enterprises (SOE’s) are inefficient and use obsolete machinery, in spite of
recent efforts to bring SOE machinery up to date. The very structure of SOEs, though, reduce their incentives
to operate more efficiency or reduce labour costs through automated technology.
Rural firms & township enterprises:
Relatively efficient and profitable, rural firms and township enterprises have grown in number in recent
years due to the assistance of the central government. For many international firms, dealing with these
companies is an easier process than with the large SOE’s, due to the former’s relative absence of
bureaucratic hassle. The best way to connect with these firms is to attend trade fairs and international
exhibitions, which are regularly held throughout China each year. In general, Chinese firms tend to rely on
word-of-mouth when purchasing machinery.
Wholly foreign owned subsidiaries & Sino-foreign joint ventures:
As foreign food processors continue to tap the China market, the demand for foreign-produced machinery
has witnessed a corresponding rise. This group of end-users is already creating growing opportunities for

machinery suppliers and will continue to do so for years to come.
NB: due to the fact that the food handling and packaging machinery industry is highly decentralized, there is
no central industry coordinator responsible for maintaining comprehensive statistics and, thus, in the above
statistics some inconsistencies may occur.
Electronics:
The Household & Electronic industry is one of the pillars of Chinese economy. In recent years, major brands
of China's household appliances and electronic products have been thriving both in production and
marketing, which would inevitably encourage the demand for package and bring great business opportunity
for domestic packaging industry and overseas famous suppliers.
The Household and electronics industry has long been among the pillars of the Chinese economy, and in
recent years brands within the industry have thrived in both production and marketing. Overseas suppliers
of packaging materials thus have enormous opportunities in the market, as the domestic industry is likely to
expand precipitously over the foreseeable future.
Packaging equipment in demand:
• Case/carton preprint equipment
• Die-cutter
• Bronzing machine
• UV varnish machine
• Gluing machine
• Cartoners
• Packaging inspection equipment
• Shrink film packaging machines
• Case packers
• Wrapping machine
• Labelling and label printing machine
• Palletising

• Reclaiming and recycling equipment for packaging
Healthcare & Cosmetics:
Most healthcare & cosmetics products depend on imported machinery, with filling machines made in China
sharing a small piece of market. In future packaging machinery featuring precise measurement, continuous-
motion linked or integrated complete production line will be in great demand.
Domestic filling machines comprise a small portion of the healthcare and cosmetics product market, leading
to a dependence on imported machinery. A future trend in the industry is demand for precise measurement,
continuous-motion, and integrated complete production lines.
Demand:
• Demand changes are mainly represented by varied demand for the filling machine in the healthcare and
cosmetics industry
• Precise measurement
• High-speed and high automation
• Within the next few years, continuous-motion linked or integrated complete production lines are to be
introduced
Dairy:
The dairy industry, which has developed markedly in recent years, has spawned notable demand for multi-
stuff yoghurt packaging, such as ‘cup-in-cup’ packages for oatmeal and nuts, as well as small paper cluster
packaging.
Demand:
• New products raise new requirements on integrated filling machines. For example, in 2004 Shanghai
Bright Dairy & Food launched a fruit yoghurt product mixed with big fruit granules with the diagonal
length of the granules ranging from 12 to 21 mm. At present, only foreign manufacturers can provide
them with completely automatic fillers for this type of yoghurt production.
• The appearance of new packaging forms inspired higher requirements for filling machine automation
and packaging containers. For example, some large dairy enterprises such as Beijing Sanyuan launched
milk in plastic barrels in succession. Therefore, demand for higher automatic filling machines and
suppliers who can produce more packaging barrels increased.

Food
Statistics from the National Bureau of Statistics of China reveal that the food industry has grown even faster
than the national economy as a whole. In 2004, food sales income reached CNY 900bn, while analysts
project a continued 10% growth rate.
Demand:
• An instant food production line integrating processing and packaging
• Vegetable and fruit processing and fresh-keeping equipment
Beverage:
The Chinese beverage industry registered a gross output of 22.6 mn tonnes in 2005, a number projected to
increase to 37mn tonnes by 2015. This growth has been spurred by the rise of packaging, filling, labelling,
and coding technologies.
Demand:
• Blowing-filling-sealing (BFS)
• Aseptic cold filling
Pharmaceutical:
In 2004 the Chinese pharmaceutical industry exceeded over CNY 35bn in output, an increase of 17.05% from
2003. Packaging within the pharmaceutical industry, however, lags behind development of the industry
itself. Nevertheless, opportunities remain promising.
Demand:
• Complete production line integrating blister packing, cartoning, shrink-wrapping, case packing, and
sealing
• Versatile blister packaging machinery
• Automatic capsule filler
• Multi-lane bagging machinery
• BFS (blowing-filling-sealing)

• On-line inspection equipment
• Coding equipment
6.7 Industrial packaging zones
The coastal provinces in China are by far the most developed in the country. Within this area, the three main
industrial packaging zones are located in the Pearl River Delta including Hong Kong and Guangdong Province,
the Yangtze River Delta centred around Shanghai, and the Beijing-Tianjin Bohai Rim, which also includes part
of Hebei Shandong province.
6.8 Local sourcing
Due to its underdeveloped domestic paper products and plastic raw materials manufacturing industry, China
depends heavily on overseas suppliers, particularly in regards to high-quality products.
According to recent reports, China’s enormous demand for raw materials has led to price pressures on
recyclable goods in distant Europe. One report stated that the large numbers of freight and cargo ships
delivering Chinese goods to Europe are filled with waste on their way back. As a result, some European
recycling firms are going out of business and more than 33% of the waste paper and plastic collected by
British local authorities, supermarkets, and businesses are arriving in China.
The price fluctuations of imported raw materials, however, have caused a local sourcing trend. In 2002, the
price of waste paper in the US rose by 50%, while the prelude to the Iraq War caused a spike in the plastic
resin and raw material prices by 30%. In response, the Chinese government is encouraging foreign
investment in establishing domestic paper production supplies; a move the government hopes will reduce
vulnerability to price fluctuations.

7 Disclaimer
To the best of our knowledge, the information contained in this report is accurate. However, China
Intelligence Online is not responsible for actions taken based on information herein.
Readers are urged to exercise due diligence before any business arrangement.

China Packaging Industry Report 2006

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