© 2019 by RsA Asia Tax Advisors

China anti-COVID19 industrial conversion

March 17, 2020

More and more companies in China have transformed or converted their business to meet the rising demand for masks, protective gears, and medical products deriving from the coronavirus outbreak. Thousands of companies, including big auto-manufacturers as BYD and GAC, have set up production lines to manufacture masks and melt-blown non-woven fabric, an essential raw material, 

 

Local market regulators have issue new licenses to open additional factories to produce high-quality masks to be used by medical staff and health workers, while the State Administration of Taxation and the Ministry of Finance have provided significant incentives for the companies that intend to engage in manufacturing of key materials for the prevention and control of the epidemic outbreak.

Before the outbreak, the masks produced in China accounted for half of the global production; now, the total output from Chinese manufacturers has increased to around 200 million masks a day, among which 600,000 are N95 type.

 

BYD, one of the largest new energy vehicle manufacturers worldwide, has converted a factory, previously employed for the production of electronic devices, for producing masks; in a month-period, BYD has created 100 masks production lines with a total output of five million masks and 300,000 bottles of disinfectants per day and intends to further expand to include additional 100 production lines and to reach a daily production of 10 million masks.

 

SAIC-GM-Wuling, a joint venture between General Motors and SAIC, dedicated its factory in Guangxi Province to the production of masks, reaching a daily output of 1.7 million masks.

 

Other companies have invested in expanding the production lines of raw materials employed in the production of masks, such as non-woven fabric, in order to satisfy the increasing demand from masks manufacturers:

  • Sinopec announced the investment of 30 million USD to build 10 melt-blown non-woven fabric production lines to start as soon as possible

  • Malion New Materials, a listed company in Shenzhen, announced the investment of 17 million USD to build a production line with an annual output of 8,000 tons of melt-blown non-woven fabric;

  • Shouhang High Tech Energy, another listed company in Shenzhen, intends to invest 2.9 million USD to build a new production line in North-East China;

  • Senior Technology Material will invest 5.8 million USD to build a production line of melt-blown non-woven fabric with a total annual output equal to 1,600 tons

  • Henan Xinye Textile will invest 17 million USD in setting up two non-woven production lines of masks and other protective gears and cloths

 

The increasing number of manufacturers and the important investments may lead to a potential overcapacity in the next months when the demand will drop due to the containment of the outbreak. Still, it clearly shows how fast the Chinese business environment can react to the crisis.

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