China has experienced over two decades of high economic growth, which has been stimulated by the consecutive increases of industrial output, consumer consumption and capital investment. China' s GDP has been growing at 11% per annum. National industry output advancing at 10.3% pa will continue to sustain a strong growth into the next decade, supported by the fast-growing middle class that is creating an enormous consumer society. As the fastest-growing economy in the world, the emerging market has attracted global investors and corporations for the last two decades. Introduction of foreign advanced technology and capitals will continue to be favored by the Chinese government and business community. New ways will be adopted to utilize foreign investment, including mergers, acquisition, and investment funds and securities investment. China will continue to improve its investment environment in the areas of legal system, intellectual property protection, foreign trade and investment regulation, infrastructure and financial system. China is the second largest foreign investment recipient after the United States in the world today. Given its vast market, the country provides tremendous opportunities for investment and trade both for the present and future.

The huge global and domestic demand for China's polymer products has helped multiply growth in China in the last decade to become the global hub for imports, processing, exports and consumption of plastics. Trailing behind only USA, China has moved on to become the world's second largest producer of plastic products. The Chinese market has been growing at more than 10% in polymer for the last decade compared to the global growth rate of 4-5%. Global manufacturers have moved or are in the process of setting up manufacturing plants in China with mega investment outlays in the country's petrochemical and polymer industries. Global chemical and oil giants including Dow Chemical, Dupont, BASF, Bayer, Chevron Texaco, Shell, Mitsubishi Chemicals and BP, have already invested or plan to invest in China. With this, China's plastics industry seems poised for further growth. Consultancy firm KPMG, in its report notes that annual investment in China is at US$30 bln, out of which 50-60% is from foreign investors. China is estimated to account for nearly 40% of the demand for chemicals by the end of 2006.

China's accession to the WTO and a flood of mega sized foreign investments into its plastics and petrochemical industry has made it a global hub for cheap plastics manufacturing. The inherent benefits of cost savings in the Chinese plastics industry has prompted many multinational companies to set up manufacturing bases in China - in turn to technology transfers, transfer of process knowledge. This quantum of cmparative and competitive advantage could make China at the receiving end of some more preferential investments, thus supporting its double-digit growth rate in polymer consumption in the next decade. Presence in China also lends MNCs the ability to effectively manage the price risks prevalent in the global plastics industry. 'The China Price' and competitive advantage together make it imperative for companies to move fast and intelligently to build on the opportunity in China or face a tough future.

China's lack of significant gas and oil reserves and consequent dependence on raw material imports exposes its plastics industry to price fluctuations in the crude oil markets, impacting the trade flows into the country. Though China is attempting to make up for this lack of natural resources in oil and gas by joint ventures and stakes in important oil and gas fields globally, poor logistics infrastructure, power shortages and dependence on imports for raw materials make China's plastics industry sensitive to geo-political risks. Another important negative aspect of the industry is that it is not yet self-sufficient in terms of manufacturing technology, process know-how and management expertise. To add to the minus points, China's plastic industry is still fragmented, under-invested and doesn't have any formidable company to take on the global plastics giants.

An ever-increasing demand domestically, as well as from industries like automotive, packaging and consumer durables setting up their shop or sourcing plastic components from China, will boost the industry's growth. KPMG in its report observes that infrastructure, power, intellectual property concerns and supply chain costs will continue to constrain the industry. The report predicts consolidation in the industry leading to emergence of a much leaner and tougher chemicals industry. The opportunities are bright for companies that can better integrate and optimize their global supply chains with local knowledge of the markets to survive in this highly competitive market.

China's growing appetite for manufacturing is increasing the demand for the high-end machinery and components needed in the manufacturing of plastic products. Already, China's plastics industry is dependent on imports for the high-end precision engineering machinery and components from Europe and USA for its manufacturing business. The Freedonia Group puts the annual demand for machinery at US$3.77 bln in 2009 and expects it to grow to US$4.92 bln by 2014. China still has a long way to go to be able to manufacture the high quality plastic components comparable to the ones produced in Europe and America.

Chinese companies, which started with simple low-cost plastic components, have now moved onto produce high-end products using the latest technologies and manufacturing processes. This indicates the pace at which the plastics industry in China is evolving and getting integrated with the global economy. China is therefore in a unique position to determine the business viability of major petrochemical and polymer producers.