With the slowdown in macroeconomic growth and the rising costs impacting businesses, the printing industry is facing increasing pressure that is quickly spreading through the supply chain. On August 12, 2008, Beiren Printing released its semi-annual report, revealing that by June, it had generated revenue of approximately RMB 390 million. According to both Chinese and Hong Kong accounting standards, the company recorded a net loss of RMB 22.8 million or RMB 20.98 million for the period. Shanghai Electric, another major player in China’s printing sector, also acknowledged the broader challenges facing the industry. Yang Changcai, General Manager of the Supply and Marketing Branch at Shanghai Electric Group’s Printing and Packaging Machinery Co., Ltd., stated, “Based on past experiences, the downturn in the printing industry could last two to three years. Therefore, I don’t see an optimistic outlook for the next couple of years.” The pressure has been felt across the entire supply chain. As early as July 3, Beiren Printing issued a warning about its half-year performance, citing increased costs and adverse supply-demand imbalances that led to losses. The official semi-annual report confirmed the decline: operating profit, total profit, and net profit fell by 442%, 335%, and 303% year-on-year, respectively, with a loss of RMB 0.05 per share. Beiren explained that global economic instability, triggered by the U.S. subprime mortgage crisis and surging prices of commodities like oil and grain, caused widespread inflation. Domestic macroeconomic controls further slowed growth, while factors such as the renminbi’s appreciation, reduced export tax rebates, and rising raw material and labor costs hit downstream printing companies hard, leading to sharp profit declines, production cuts, or even bankruptcies. This trend is reflected in the performance of other listed printing companies. For example, Jilong Industrial reported a net profit of 3.07 million yuan for the period, down 24.98% from the previous year. Meanwhile, Hongbo’s return on equity (ROE) dropped from 6.52% in Q1 to 4.66% in the first half of the year—far below the 31% and 41% seen in 2007 and 2006. Yang Changcai confirmed that many printing companies in South China have either collapsed or moved operations overseas. “A significant number of foreign-invested and joint-venture firms have shut down their factories and relocated to Southeast Asia, where costs are lower,” he said. According to Guo Zhenju, an analyst at Essence Securities, private and foreign-invested companies make up 76% of Guangdong’s printing industry, compared to just 20% for state-owned and collective enterprises. Changes in foreign investment directly affect the Pearl River Delta, which accounts for over one-third of China’s national printing output. The impact of the renminbi’s appreciation has also hurt export-driven sectors. Shanghai Electric, whose printing equipment exports account for over 60% of domestic exports, reported a significant drop in export profits. Similarly, Beiren Printing saw a steeper decline in foreign sales (-33%) than in domestic sales (-28%). Amid these challenges, some regions are showing signs of resilience. Yang noted that North China outperformed the rest of the country in equipment sales this year. The Northeast, in particular, has seen substantial investment, prompting the company to adjust its strategy and target the northern market more aggressively in the second half of the year. The printing industry in the Northeast has grown by 30% so far this year, surpassing the 21% compound annual growth rate recorded between 2005 and 2007. Guo Zhenju pointed out that in the more mature East and South China markets, between 10% and 20% of companies are unprofitable. In contrast, the situation is worse in the Northeast and North China, where 25%-30% of companies are losing money. However, there are signs of upgrading in these regions, especially if industry consolidation drives demand for high-end printing equipment. In addition, large printing companies are looking to textbook reforms as a potential growth driver. Yang said that the reform of textbooks has significantly boosted the book and periodical printing market, and he expects this segment to grow in the coming year.

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