China’s biggest manufacturer of plastic bags is now in liquidation. The news broke shortly after the Chinese government announced restrictions on ultrathin plastic bags and on free plastic shopping bags.
Henan-based Huaqiang Plastics shut down its two large production facilities on 1 February, releasing thousands of workers. The firm notified its suppliers via mail and began liquidating assets. The company, with 2.2bn yuan (?205m) in sales, is closing its doors because of the ban on ultrathin bags, according to several major Chinese newspapers that claimed to be quoting an unnamed Huaqiang spokesman.
“About 90% of Huaqiang’s products, more than 220 million pounds annually, are ultrathin bags, therefore the company won’t have a chance to survive under the new law,” one Chinese newspaper said.
But Huaqiang denied having spoken to the press on the subject. “We are in the process of liquidating under laws and regulations,” a company spokeswoman said by phone. “We don’t comment on the cause of the shutdown.”
The 13-year-old firm’s two production plants in China, one in Sui County and one in Luohe, were the No. 1 and No. 3 top taxpayers, respectively, among the country’s 13,000 single-location plastics processing sites, according to China’s taxation records.
Some industry sources have said that attributing the closure to the ban makes little sense. It is not technically difficult or cost-prohibitive to adjust existing machinery and increase the film gauge, said Allen Tsai, general manager of the US branch of film and bag equipment maker Lung Meng Machinery in Tainan, Taiwan. “There’s little hurdle for such a leading company to convert to high-grade products and meet the new standards,” Tsai said in a phone interview. “I do not know what they are thinking.”
As an indicator of Huaqiang’s scale, its liquidation sale includes more than 1,600 blown film machines and 1,000 bag-making machines, as well as large quantities of virgin resin, recycled resin, semiprocessed scrap, additives and compounds. “That’s only from one of the facilities,” an industry insider said.
Dong Jinshi, vice president of the Recycling Committee of the China Plastics Processing Industry Association, found the news puzzling. “The policy front couldn’t have been the determinant factor. It has to be the company’s internal problems,” he said from his Beijing office. He agreed, however, that the company will lose the majority of its current clients – distributors and end users of ultrathin bags.
In early November, before Huaqiang shuttered the factories and began liquidating, the firm listed itself for sale on the China Equity Exchange Information Center website. Huaqiang was seeking an aftertax price in the range of 280m to 350m yuan (?26m) to ?33m). At the time, the company said it would be available for sale until 12 November 2008.
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