Instead of worrying about China, companies are better off embracing the opportunities.

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Solutia looks to capitlize on growing China market
ST. LOUIS POST-DISPATCH
06/17/2008

Solutia Inc. Chief Executive Jeffry Quinn on Monday signed $182 million in contracts with companies from China, a country that looms large in his corporation’s future as well as in the minds of many American executives.

Quinn was in a line of local industry leaders who put pen to paper and sealed deals with Chinese customers during a trade delegation conference at the Ritz-Carlton hotel in Clayton.

Among these, Ferguson-based Emerson sold $70 million in telecommunications and power-related equipment. And locally based soybean trade groups, representing companies such as Bunge, Cargill and ADM, closed deals worth nearly $5 billion.

“Solutia obviously is very pleased to participate in this event and have a small role in demonstrating the vitality of the St. Louis region, as a source of economic development and as a trading partner with China,” Quinn said. The company, based in Town and Country, makes specialty chemicals and performance-enhancing window films.

As the U.S. economy lags, rapid growth and an expanding middle class make China an irresistible market for domestic companies.

Solutia, with annual sales of nearly $4 billion, said that 58 percent of its total revenue growth between 2006 and 2011 will come from China. That translates to total Chinese sales of $439 million in 2011, up from $166 million in 2006. These sales stem from lines of business that are becoming increasingly profitable as Solutia raises prices and improves logistics and manufacturing efficiency, Quinn said.

Solutia exports nylon resins and polymers to China from a plant in Pensacola, Fla., which played host to nearly 30 members of the trade delegation on Sunday. Solutia’s products fill the holds of cargo ships returning to China after bringing loads of low-cost manufactured consumer goods to American shores.

The Asia-Pacific region is key in Solutia’s strategy of transforming its under performing domestic nylon carpet-fiber business into a global supplier of resins and polymers for plastics.

Gone is the view of China as simply a place to outsource jobs and lower the cost of manufacturing. The booming nation is a market in its own right — in Solutia’s case, for goods manufactured in the United States.

“We look at China not as a place to outsource production and find cheap labor, but as a vibrant market that needs and desires the quality products that Solutia produces around the world,” Quinn said.

But that’s not to say the company lacks investment in China — that was a key point in Solutia executives’ closed-door remarks to that country’s trade officials, the CEO said.

In China, Solutia produces tinted window films and, through a joint venture, makes heat-transfer fluid. Solutia recently disclosed plans to build a rubber-chemical plant. And its automotive and architectural window films are sold through more than 5,000 retail locations.

Zhou Lin, general manager for Liaoning Yinzhu Chem-Tex Group Co., said his company buys a type of nylon pellet produced at Solutia’s plant in Pensacola and spins it into fibers. His company chose Solutia for the high quality of its products, but will deepen the relationship by seeking its advice on how to make technical advances.

Kingfa Science & Technology Co. also buys the nylon pellets for melting into plastic materials. It is mainland China’s largest domestic engineered plastics compounding company, and is growing at a rapid clip — which will mean more business for Solutia, said Li Nan-jing, Kingfa’s vice general manager.

The products of these companies — along with Hangzhou Youngchang Nylon Co., which also signed a contract with Solutia on Monday — are found in everything from industrial products to non-stick spatulas, and from electrical-outlet covers to under-the-hood car parts.

Solutia’s drive to do business in China doesn’t mean it is neglecting the American market, Quinn said. North America remains the company’s biggest market in many product lines. However, China’s economy is growing fast, as is demand.

“China is still a work in progress, and, like many of the developing economies around the world, there is certain room for improvement” in its openness to American goods, said Quinn. “But we have found the Chinese marketplace to be a very receptive market.”

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