Influencing the chinese way

Glass manufacturing in emerging markets has been one of the most successful investment ventures for the World Bank, with no defaulters so far on 55 loans. The International Finance Corporation, part of the World Bank Group, undertakes investment south of the Equator and in Eastern Europe. At Glasstec, two representatives from the IFC’s many divisions presented their outlook for the flat glass industry in China.

China, with 100 float lines, already has nearly 50 per cent of the world’s float glass capacity, but at most 12 lines roll out Western quality product. With some additional 40 float lines planned, this 1.2 billion population country is achieving 25% year on year growth in high quality glass for architectural and automotive uses. Demand is growing by about 8%, mainly from the 350 million population in the richer coastal regions. China is also beginning to export shower screens and furniture glass to the USA.

Pilkington and Saint-Gobain have joint ventures with local companies in China, and the IFC first got involved with when Asahi set up a Chinese operation. The World Bank makes an attractive business partner because of the long repayment terms it offers. Projects have to meet the higher of two environmental standards: the host country’s or the World Bank’s, and the Chinese partner is usually ambitious in this area. The IFC-funded plants tend to be the best in China, and the state-owned plants the worst.

Float glass is truly becoming a commodity, and the Chinese experience has major implications: a Western quality plant can be built in China for 50% less. The IFC envisages that one or two companies will emerge as major competitors in float glass.

IFC’s Garth Hedley described the decline in inferior float and sheet glass as a slowly deflating bubble but noted that they still receive loan requests to build sheet glass plants in China and India. Such is the counterfeit culture in these countries that people demand brands but are happy to settle for a poor quality fake.