China’s Recent Government Policies to Boost Laundry Contract Manufacturing Industry
The laundry industry in China is dominated by domestic players due to their brand awareness and wide product portfolio. Multinational laundry care manufacturing companies operate in China majorly by engaging with contract manufacturers, which helps them market innovative products best suited to the consumer need. However, contract manufacturing companies faced high toll fees in 2018 because the contract manufacturers were finding it difficult to balance their business, especially their operating cash flow, as it was difficult to borrow from banks due to China’s economic crisis. Toward the end of 2018, the Chinese government started implementing monetary-easing measures, such as freeing up banks to offer more loans and tax cuts. This article discusses why it was difficult for the contract manufacturers to obtain loans during 2017–2018 and how the scenario is expected to change from 2019.
Laundry Industry in China:
The Chinese laundry market size is estimated to reach $~10 billion in 2019 and is expected to grow at a moderate CAGR of 1.5-2 percent till 2023, majorly due to the economic slowdown. The demand for liquid laundry detergent in China is growing at a higher CAGR than for the dry laundry one (7.5-8 percent), propelled by ease in application (pre-dissolved in detergent) and less wastage as compared with detergent powders. The China liquid laundry market supplier base is slightly more consolidated than the dry laundry one as small-scale domestic manufacturers have not been able to market their products, unlike the two big multinationals (P&G and Unilever), who have already gained significant market share in this space.
China’s Economic Slowdown:
China’s GDP in 2018 was 6.6 percent, and with trade tensions between the U.S. and China expected to start affecting growth in 2019 and 2020, GDP is likely to dip further to 6.2 percent in 2019 and 2020, according to IMF estimates. As the domestic household consumption is largely in line with the economic growth, sales of laundry products are expected to see only a moderate growth.
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