Nine Policies Plus Cultural Industry Revitalization: New Opportunities for China’s Printing and Packaging Sector

China has introduced nine key policy measures for the printing industry:

1. Interest subsidies for imported printing equipment

In 2007, printing companies that imported three types of offset presses and one type of die-cutting machine within specified technical parameters could apply for interest subsidies covering up to 6%–7% of the import value.

1. Higher export tax rebates for selected printed products

From November 1, 2008, export tax rebate rates for certain publications and paper stationery were raised to 13% and 11%, respectively.

1. New corporate income tax law benefits domestic-funded printers

The new tax law brought several advantages to printing enterprises, most notably a unified 25% income tax rate for domestic and foreign-invested companies.

1. VAT deduction on equipment purchases for printers

Starting January 1, 2009, all general VAT taxpayers across China—regardless of region or industry—could deduct input VAT on newly purchased equipment. Unused credits could be carried forward, a change that also benefited the printing sector.

1. Labor Contract Law creates new agenda for printing firms

The law places greater emphasis on protecting workers’ rights while also taking employers’ interests into account.

1. Lower entry threshold for Hong Kong and Macao investment in mainland packaging printing

From January 1, 2009, packaging and decoration printing enterprises set up in the mainland by Hong Kong and Macao investors had their minimum registered capital applied by reference to mainland enterprises.

1. Ten printing wastes listed in the National Catalogue of Hazardous Wastes

Two ministries jointly issued the catalogue, which includes 7 categories and 10 types of hazardous waste from the printing industry.

1. Printing industry included in Ministry of Environmental Protection clean production audits

Environmental authorities will conduct mandatory clean production audits for “double-exceed” enterprises and “double-hazardous” (toxic and harmful) enterprises. Photosensitive material waste from printing is classified as a double-hazardous substance.

1. Hong Kong funds clean production for Pearl River Delta printers

The Hong Kong government allocated HK$93.06 million to support clean production by Hong Kong-invested enterprises in the Pearl River Delta across eight major industries, including printing and publishing.

Mortgage loan policy for tax-reduced and tax-exempt equipment was promoted;

Comprehensive credit lines helped enterprises meet urgent needs;

Banks tailored financing plans for enterprises;

Adjustment and revitalization plans were introduced for five industries, including printing;

Preferential policies for restructured enterprises were extended to 2013;

The “six major projects” advanced industry digitalization;

Service industry development guidance funds supported transformation.

Current state of the printing industry

World economic experts generally agree that the main impact of the financial crisis fell on Europe and the United States, while China was relatively less affected.

Even so, under state macroeconomic controls and domestic demand stimulus policies, a large share of Chinese printing enterprises still went bankrupt, mainly small and medium-sized printers. These firms had weak adaptability, difficult financing and limited technological innovation. During the crisis, they faced fiercer competition, lower printing prices, rising raw material costs and higher production costs. Overburdened, many chose bankruptcy to end losses. Larger printers, with stronger resources, staggered through the crisis; yet they still faced falling profits, a shrinking industry, rising costs and a wide earnings gap.

This reveals common weaknesses in China’s printing industry. First, outdated management models: when unexpected events such as the financial crisis hit, enterprises lacked adaptability and emergency systems. Poor management led to blurred strategies and lower efficiency. Second, weak technological innovation: China’s printing technology lags behind, and few companies have independent innovation capacity. Under the crisis, many could only cling to existing technology and engage in a desperate, uncertain struggle. Third, weak financing capacity: small and medium-sized printers had few financing channels, limited access to capital and no pre-set risk reserves, leaving them vulnerable to cash-flow difficulties during the crisis.

One set of figures shows the importance of SMEs: they account for 99% of all enterprises, about 60% of total economic output, around half of tax revenue and more than 75% of employment. Without an SME recovery, there can be no recovery in the Chinese economy. Supporting SMEs is therefore vital for growth, stability and livelihoods. Recently, local governments have introduced various policies and measures to ease SME financing difficulties and encourage employment, and the printing and packaging industry is among those supported.

Since June, China’s industrial production has accelerated, profitability has improved, and new progress has been made in energy conservation and emissions reduction. China’s economy has grown rapidly, and with state policies in place, the printing industry has also shown growth momentum.

On January 8 this year, the National Development and Reform Commission issued the Outline of the Plan for the Reform and Development of the Pearl River Delta Region (2008–2020). The State Council subsequently approved seven plans: Several Opinions on Supporting Fujian Province in Accelerating the Development of the West Coast Economic Zone of the Taiwan Straits, the Development Plan for the Guanzhong-Tianshui Economic Zone, the Development Plan for the Coastal Areas of Jiangsu, the Overall Development Plan for Hengqin, the Development Plan for the Liaoning Coastal Economic Belt, the Plan for Promoting the Rise of the Central Region, and the Outline of the Plan for Regional Cooperation and Development of the Tumen River in China. The number of regional economic plans approved this year equaled the total of the previous four years, and the pace of their release drew attention.

With support from multiple national policies, China’s printing industry faces numerous opportunities. Some experts predict that by 2011 the global printing market will shift eastward: North America and Europe will fall to 28% and 31% respectively, while Asia and other regions will rise to 30% and 11%. The total market value is expected to exceed US$720 billion.

According to the Eleventh Five-Year Plan, by the end of the period China’s printing industry is expected to reach roughly RMB 449 billion yuan in gross industrial output, about 2.5% of gross national product, with printing production and processing capacity entering the world’s front ranks. By 2010, the overall global market growth rate for printed products is expected to be 3%–4%, and the printing industry will face growing competition and pressure. By 2010, digital printing will rise from 4% of the total to 14%, with inkjet accounting for half; by 2015, digital printing output value will reach EUR 124.8 billion. By 2010, the overall growth rate for printed products is expected to be between 3% and 4%.

As China’s economy develops and integrates with the global economy, capital is entering China’s printing industry more quickly. By 2020, about half of all printed products will be produced on digital printing presses.

Variable data printing will become a main driving force for the industry. A series of figures indicates that China’s printing industry has promising prospects.

What should printing enterprises do?

In August this year, the State Council issued the Cultural Industry Revitalization Plan. In the plan, printing and reproduction, together with cultural creativity, publishing and distribution, and other eight major industries, were listed as key cultural industries for future development. This further clarifies the strategic position of printing in national economic and social development and offers a rare historic opportunity.

Faced with so many opportunities, what should printing enterprises do?

1. Understand the development situation and accelerate enterprise restructuring

With multimedia networks advancing rapidly, electronic paper has become a major challenge to paper media. If the printing and publishing industry wants to maintain its place amid fierce competition, it must grasp printing’s development trends. The impact of electronics and the shrinking printing market are unavoidable. Rather than evade the issue, the industry should actively respond by changing its business model to fit the new environment.

1. Improve enterprise management systems and develop new industry segments

The General Administration of Press and Publication has arranged for publishing industry restructuring to be completed by the end of 2010. This restructuring places publishing and printing on the same starting line for fair competition, promotes survival of the fittest among printers, and drives technology and equipment upgrades. In this context, printers cannot rely on existing resources and past gains; they must actively develop new customers and new products to diversify their business.

1. Strengthen independent innovation and develop green printing

China’s Eleventh Five-Year Plan vigorously promotes green, environmentally friendly printing and pushes the industry from traditional passive processing toward high-tech, proactive services. Printing technology is a weak link in China’s printing industry, from press manufacturing to printing and reproduction to publishing. Relatively backward technology leaves a gap between China and developed countries. As the printing market shifts eastward, printers that want to win more customers must have their own innovative technologies and build China’s printing brand through low reject rates and green printing.

1. Standardize printing operations and pursue product qualification certification

To grow quickly, printing enterprises should establish standardized printing methods, reduce waste of consumables, improve efficiency, lower costs and strive for higher profits.

Source: China Packaging Network (pack.cn); original link: http://news.pack.cn/show-362255.html