China plastics probe hits EU, U.S., Japan, Taiwan: 5 things to know Target material used in cars and more; timing on eve of Lai inauguration raises eyebrows
China plastics probe hits EU, U.S., Japan, Taiwan: 5 things to know
Target material used in cars and more; timing on eve of Lai inauguration raises eyebrows
HONG KONG -- China's Ministry of Commerce has initiated an anti-dumping investigation into a chemical product called polyformaldehyde (POM) copolymer, exported by companies in the European Union, the U.S., Japan and Taiwan.
The decision announced Sunday left industry players puzzled as to why this particular material was being targeted among so many exports to the country, and why now.
Here are the five things to know.
What is POM copolymer, and what is it used for?
A copolymer is a compound formed by joining multiple substances together to attain new characteristics and functions. The one in question is known by various names, such as polyoxymethylene, acetal and polyacetal.
POM copolymer belongs to a group of materials known as engineering plastics. These plastics have higher durability and heat resistance than ordinary resin, making them a suitable substitute for various metals such as zinc, copper, aluminum and steel. They can be molded into precision components for a wide range of engineering and mechanical products, including automobiles, electric appliances, industrial machinery, medical equipment and more.
While POM copolymer is not a household name, it is a crucial material that supports vital industries. Thus, Beijing encourages domestic production.
Why did China launch the probe?
According to the ministry's official announcement, it is simply following legal procedures stipulated in China's Anti-Dumping Ordinance of 2002, and it is not uncommon for governments around the world to take anti-dumping measures.
The application for an investigation was made by eligible local players, which documented the alleged damages in a specified format, giving the ministry 60 days from submission to evaluate whether to take action.
The ministry said that based on the "examination results" it decided on Sunday to start the probe, which should be completed within a year but could be extended for another six months.
The ministry targeted imports of the same product in 2017 from South Korea, Malaysia and Thailand, imposing anti-dumping duties that are still in force.
But why act now?
Like many decisions made by China, the real reasons and intentions are unknown.
But it is worth noting that six Chinese companies filed a joint application for the probe dated April 22. Thus, the ministry could have waited until June 20. The ministry had not responded to Nikkei Asia's query about the timing of the announcement as of publication.
While it is not rare for Chinese authorities to take such actions on Sundays, it did not go unnoticed that the announcement targeting a Taiwanese company came the day before the inauguration of Taiwan's new President Lai Ching-te -- a man Beijing considers a "separatist." On the day of the inauguration, the Commerce Ministry also added a few U.S. companies to the so-called "unreliable entities list," including General Atomics Aeronautical Systems and General Dynamics Land Systems, for selling arms to Taiwan.
Taiwan's former President Tsai Ing-wen, new President Lai Ching-te and new Vice President Hsiao Bi-khim wave during the inauguration ceremony outside the presidential office building in Taipei on May 20. © ReutersChina has a history of flexing its economic muscle and weaponizing business-related measures for political reasons, including bans on pineapple imports from Taiwan and an embargo on rare-earth exports to Japan.
Guann-Jyh Lee, a spokesperson for Taiwan's Ministry of Economic Affairs, issued a statement late Sunday saying the ministry is willing to proactively assist with legal countermeasures, while eyeing efforts to open new export pathways later this year.
The scope of the probe extends to companies from the U.S., which recently hit China with tariff hikes on electric vehicles and solar panels, and the EU, which is probing Beijing's subsidies for its EV industry.
Yuyuan Tantian, a social media account affiliated with state broadcaster CCTV, wrote on Saturday that China "actually has sufficient countermeasures" to retaliate against ever-increasing pressure from the Europeans under anti-subsidy probes in various forms.
"If Europe continues to take actions, it is very possible that China would have no other choice but to engage in a series of measures to hit back," the post said.
Which companies are affected?
The companies named include Celanese from the U.S.; Polyplastics, Asahi Kasei and Mitsubishi Gas Chemical (MGC) from Japan; and Formosa Plastics from Taiwan. Celanese was named for its exports from its European entity.
A public relations spokesperson for MGC told Nikkei Asia on Monday that there could be a "certain influence" on its business if anti-dumping measures are actually implemented. POM is one of eight core businesses for MGC, reaffirmed in its latest three-year strategic plan revealed earlier this month, and Chinese demand is a major part of this.
However, the company is cushioned to some degree, as it already produces the material in the eastern coastal Chinese city of Nantong. It has taken a 30% stake in a new venture with Polyplastics in the same city, where the production capacity is expected to be enhanced as early as this fall.
A spokesperson for Daicel, the 100% parent of Polyplastics, expects the impact of a potential anti-dumping tariff to be limited, as his company's coming expansion plan in China is set to meet growing demand in the country.
For a larger chemical conglomerate like Asahi Kasei -- which also produces in China, in Zhangjiagang, just across the Yangtze from Nantong -- the consequences are likely even less significant. President Koshiro Kudo told reporters on Monday that the impact of the probe is "not material."
The president's office of Formosa Plastics told Nikkei Asia on Monday that it "will fully cooperate with the investigation," adding that sales of POM during the first quarter were about 1% of its total revenue.
Celanese had not responded to queries as of publication time.
Stock market reactions were muted. All five companies' shares closed Monday trading within 1%, up or down, of their closing prices on Friday.
Which Chinese companies stand to benefit?
The six Chinese companies that brought the case are Yunnan Yuntianhua, CHN Energy Ningxia Coal Industry, Kaifeng Longyu Chemicals, Yankuang Lunan Chemicals, Tangshan Zhonghao Chemicals and PetroChina (Inner Mongolia) New Materials.
CHN and PetroChina are under major state-owned conglomerates, but the others are mostly small to midsize companies.
The complainants do not appear to have made public statements on the matter. Shares of the only listed one, Yunnan Yuntianhua, rose by 3% on the Shanghai market on Monday, while those of Kailuan Energy Chemical, the full owner of Tangshan Zhonghao, gained 6% on the same bourse.
According to the application pleading for the anti-dumping investigation, total imports in 2023 from the four regions involved came to 111,035 tons, up by a mere 1.5% on the year. The increase in 2022 was over 14%, but the latest volume figure does not appear especially alarming.
One industry insider, who spoke to Nikkei Asia on condition of anonymity, said, "I believe this is probably about protecting China's own industry that it wishes to nurture, as economic national security, which the West is placing more emphasis on these days, goes both ways."
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