Hua Qiang, China's largest plastic company—with an annual output value of 2.2 billion yuan (USD $ 300 million)—has ceased production and put itself up for sale.
The company, located in Henan province, employs approximately 20,000 people. The State Council's new regulations on plastic production together with increasing labor costs are said to be the cause of the operation's closure.
According to Henan Business Daily, Hua Qiang mainly produces plastic bags with an annual output of 250,000 tons, worth 2.2 billion yuan, making it China's largest plastic producer—a position it has held for the past decade. It covers 50 percent of the market in China and in some places, it covers 100 percent of the market.
On January 18, 2008, employees of Hua Qiang at Luohe were told that the factories where they worked were closed. At the same time, employees of Hua Qiang at Suiping (in Zhumadian City) were suddenly told to leave the job. Liu Henglie, director of Suiping County Business affairs Bureau also confirmed, “Hua Qiang has been suspended operation before the New Year.”
According to www.property-bid.net, the price tag for Hua Qiang's is purportedly between 280 to 350 millions yuan ($ 35-40 million) after tax.
An employee of Hua Qiang at Suiping said that the State Council banned the production, sale and use of plastic bags thinner than 0.025 mm by June 1 of this year. The spokesperson also said that 90 percent of Hua Qiang's products fall under this ban, leaving the company with no choice other than to suspend its operations.
“In addition, the closure of Hua Qiang was mainly affected by the implementation of the new labor law,” said a local government official. Nearly 2,000 employees have worked for Hua Qiang for 10 or more years. In accordance with the new labor law, they would be designated “permanent employees,” adding over 10 millions yuan ($1.2 million) in personnel cost to the company annually.
However, a director of another Henan plastic bags production company said that the closure of Hua Qiang wasn't necessarily inevitable after the new regulations went into affect.
He said, “The State Council's ban stipulates that it is not allowed to provide free plastic bags to consumers. This shows that at a reasonable cost, non-environmental protection plastic bags still have market.” But he also believes that producers need to actively adjust their production structures to survive.