Giti's Tan: China focus beyond low-labour costs

By Allison Strouse, Crain staff (R&PN)

Cleveland, Ohio -- China, the world's largest producer of tyres, is focusing now on expanding technology and developing a skilled labour force, Giti Tire Co. Ltd.'s executive chairman said in his keynote address at the start of the International Tire Exhibition and Conference.

“China has relied mainly on labour and growth,” said Enki Tan, whose address was made in conjunction with the opening of the Tire Society annual meeting, held simultaneously with ITEC. “But that is coming to an end.”

Tan said the impact of China on the tyre industry and the general global economy has grown in the past 20 years, and said that trend will continue.

“About 60 percent of the growth in the world is going to happen in Asia over the next 20 years,” Tan said. “The shift of this growth and economies is happening and will continue as we speak, due to demographics.”

The age of the working population in China has been falling since 2010. That will have an impact in the future for the nation, he said. “It's consumers that are going to drive high growth and the increase in income,” he said.

Today, Tan said, China is about to take first place in GDP and become the biggest trader, surpassing the US

With the growth of the middle class, which he said was around 1.8 million, the demand for everyday items including automotive products was expected to increase.

“Since the 2008 global financial crisis the production of cars has decreased,” he said. “Shift of the production (of cars) has increased dramatically into emerging markets.”

During the next couple of years, he expects China will produce about 16 million to 18 million cars, while the US will make 10 million to 11 million. That increase in China means higher demand in the country for replacement parts for vehicles.

“Up until now, China has relied mainly on labour and capital investment to drive GDP growth,” he said. “This is coming to an end due to some of the factors that I have mentioned; due to China has to move into an intensive growth phase.”

Tan said the country has been developing a five-year plan to foster technological growth. Rebalancing the economy, creating innovation, enhancing education and priority industries requires everyone in China to work together, the executive said.

The first 30 years of China's growth phase primarily was driven by the will of the government. “But going forward, really the will of the people and the consumers play a critical part in this,” he said.

Basic human needs for housing, health care and education must be met, Tan said.

“If you want to transition into a consumption economy you need to have people confident that their future is taken care of and they will then have the confidence to consume,” he said.

“Our aim is to have competitive companies, but we also want to have commercially viable industries,” he said. “We must do something exceptional to survive.”

China's role in the tyre industry and other key businesses will increase in the future, the executive said.

“You look at automotive production today and the markets and it's no doubt that China would play a bigger part in setting the standards in the automotive industry and tyres,” Tan said. With most of the world adopting a green approach to business, companies within China are following suit, he said.

From Rubber & Plastics News (A Crain publication)