Will China's Rise Ruin Business In The Rest Of Asia?

1099 words - 4 pages

Carbon black is an obscure but essential industrial product. It is the coloring agent in many things black, including the ink on this page. Its biggest application is in automobile tires, making the rubber more stable and durable (and also black). It is, in other words, a commodity.Conventional wisdom is that Chinese companies have the cost advantage to undercut commodity producers around the world. This low-cost prowess is supposed to be especially damaging to emerging Asian economies, whose low-cost model is now being successfully applied by Chinese rivals in everything from plastic Christmas trees to computer chips.The continuing rise of Thai Carbon Black is a healthy counterpoint to that stereotype. Although the company would appear to be ripe for attack by cut-rate Chinese producers, the reverse has happened.The Bangkok-based company has just opened its first Chinese joint venture to sell into the Mainland market. "We expect China to make up half our sales within two years--we see tremendous potential there," says Thai Carbon Black President Subbaraman Srinivasan.Thai Carbon Black's story is not atypical. Where once many Asian companies feared the rise of China, they are now finding that China is becoming one of their best markets--even in commodity goods. Taiwan's Yue Yuen aims to become China's largest shoemaker and distributor and already has a network of 500 stores in China. South Korea's LG group is a leading player in such low-tech commodity products as home air conditioners and refrigerators. The Singapore-based Want Want Holdings is a leading producer of rice crackers. "The world--including Malaysia--will have a share in the wealth that will be generated in China. It's up to us to identify how we can benefit from China's newfound wealth," Malaysian Prime Minister Mahathir Mohamad said in a recent conference.For Thai Carbon Black the opportunity is in the Chinese carbon black market. The industry in China is fragmented, with hundreds of small producers, none with a major market share."We looked at ten carbon black makers all over China, picked two and then finally settled on one," says Srinivasan, 51. The joint venture that Thai Carbon Black set up is 77% owned by the Thai company and the rest by a state firm in need of revitalization, operating under the name of Liaoning Birla Carbon Co.The plant represents a major step for Thai Carbon Black's parent, the Aditya Birla Group of India. Although the Birla Group has sprawling interests in India, this plant is its first venture into China and the first spread of Thai Carbon Black outside of Thailand.Thai Carbon Black is itself a joint venture, 65% owned by the Birla group and the rest by local Thai investors, set up in 1978. It has since become the largest carbon black producer in Southeast Asia, with output of 160,000 tonnes.The company just qualified for a spot on our Best Under a Billion list--its third such mention since 2000. Since the Asian financial crisis of 1997, the company has...

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