Composites Opportunities and the Shanghai Free Trade Zone

China is a market of huge interest to all sorts of businesses. With its large economy it provides the opportunity to export to a growing group of consumers. It’s a customer base that is eager for manufactured goods, whether for individual consumers or to cater to China’s own growing industrial base, and this provides a great opportunity for composites manufacturers.

At the cutting edge of this opportunity is the Shanghai Free Trade Zone.

The scale of the opportunity in China has been shown in

a recent report by Irish based Research and Markets. The report, published on 11 January, predicts impressive growth in the demand for composites in China, with the market growing to an estimated $11.5 billion by the year 2018.

Major market segments for composites such as transportation, electronics and construction all grew significantly in 2012 and show no signs of flagging. Joint ventures with Chinese companies are already being established to make the most of this growth, and the need for high volume production processes in particular is expected to grow.

This is an opportunity from everybody from major composite product exporters to those providing
composite tooling design.

The Shanghai Free Trade Zone (SFTZ), established in September 2013, provides both an opportunity now and a sign of what the future has to hold.

The follow up to a previous experiment in Shenzhen in the 1980s, the SFTZ is a small part of a major Chinese city in which more liberal rules are applied to businesses. Rules on borrowing and investment are far looser in the zone than in the rest of China and the bureaucracy faced by businesses has been significantly reduced. It is an experiment by China in allowing more involvement by foreign businesses and investors, and it provides huge opportunities for the companies involved.

While the most dramatic changes in the SFTZ are in the financial sector it also creates new options for manufacturing.

Though the zone itself is an area of only a few square miles it is based on the Chinese mainland, making it an ideal base for any business looking to expand in China. Businesses can be headquartered within the zone and base key activities there while having easy distribution opportunities to the surrounding area. Liberalised investment rules will draw in financial support for businesses working in the zone and make it easier for foreign businesses to cooperate with Chinese companies in their supply chain.

The SFTZ will also provide a unique opportunity for those providing composite products to consumers and consumer-facing industries. The relatively high wealth and relatively unrestricted lifestyles of those working within the zone will create markets for all sorts of consumables considered luxuries elsewhere in China. Providing end products and the tools to produce them will create a further micro-economy of composite products within the zone, channelling more of the SFTZ’s profits into the hands of manufacturers and exporters to the zone.

But it’s not just the immediate opportunities that make the SFTZ a market which composites businesses should look to get involved in. It’s what the SFTZ represents for the future.

The zone has the backing of Chinese Premier Li Keqiang, a trained economist looking to liberalise his country’s economy and so accelerate growth. If the SFTZ succeeds then he will almost certainly extend its liberal regulations to the rest of China, as happened following the previous Shenzhen experiment. Companies who get involved now will have a foothold ready to make the most of that opportunity.

For composites manufacturers involvement in the SFTZ isn’t just an opportunity for now – it’s an investment in the world’s most important market.