Covestro AG will put into operation a new polyurethane dispersions plant in Shanghai in the first quarter of 2024, a senior executive said, as the German chemical products manufacturer eyes surging demand from China's high-end manufacturing industry.

The move is targeted at enhancing the production of raw materials for coatings and adhesives, meeting client requirements in the transportation, construction, furniture, footwear and packaging sectors.

Apart from supplying its products to domestic manufacturers, the plant will also help the company capture the growth opportunities of waterborne systems in the Asia-Pacific region.

Waterborne systems will grow stronger and address the rising demand for environmentally compatible coatings and adhesives in the Asia-Pacific region, said Thomas Roemer, Covestro's head of business entity for coatings and adhesives, during a recent one-week trip to China.

"China is, of course, supposed to grow faster than many parts of the world, both for the local market and for the export market," Roemer said. "We have observed a strong inclination toward waterborne systems in the automotive, consumer electronics, packaging and print industries."

Thanks to the lower tariff rates brought in by the Regional Comprehensive Economic Partnership agreement and the tangible growth of the Belt and Road Initiative, the market acceptance and transition of environmentally friendly solutions will move even further in China and the Asia-Pacific region economies, he added.

Besides in its top markets, China and India, the Leverkusen, Germany-headquartered group has seen substantial growth in its coatings and adhesives business in the Asia-Pacific region in recent years, particularly in emerging markets such as Vietnam, Indonesia and Cambodia.

The increasing influence of Chinese companies in the member countries of the Association of Southeast Asian Nations has also spurred Covestro to deploy resources and crew to support their expansion in the region.

Having invested almost 4 billion euros ($4.38 billion) in China, Covestro currently runs 10 production sites and two innovation hubs across the country.

With increased emphasis on the transition to a circular economy and recycling of used plastics, the company launched a mechanical recycling polycarbonate compounding line in Shanghai in October.

Covestro earned more than 3.64 billion euros in sales revenue from China in 2022, accounting for about 20 percent of its global sales, and ranking second after the United States.

Highlighting that China has been actively promoting technological innovation and development in areas such as clean energy, digital economy and high-tech manufacturing, Roemer said that with its focus on innovation-driven growth and green technology, the country has created a favorable environment for foreign businesses to invest across diverse sectors like digitalization, high-tech manufacturing and innovation.

Fueled by supportive policies and its latest industrialization drive, foreign direct investment in China's manufacturing industry grew by 1.9 percent year-on-year to 283.4 billion yuan ($39.7 billion) in the first 10 months of 2023, while that in high-tech manufacturing surged 9.5 percent, according to the Ministry of Commerce.

As high-speed railroad car components, such as wheel bogies, traditionally require multilayer coating and multistep baking production processes, Covestro signed a cooperation agreement in early November with CRRC Tangshan Co Ltd — a subsidiary of State-owned CRRC Corp Ltd — to advance the development and implementation of low-VOC (volatile organic compounds) and low-carbon emission coating systems in the railway transportation industry, supporting the sector's transition toward more sustainable practices.

In addition to signing a strategic cooperation agreement with five Chinese partners to launch an open innovation platform for sustainable development in the solar photovoltaic industry in early November, Covestro and Chinese electric vehicle brand HiPhi unveiled a joint laboratory to advance low-carbon footprint material solutions and smart technologies for future mobility.

The latest industrialization initiative has emerged as a crucial force helping shape China's future progress, offering new opportunities for multinational corporations, particularly those in the high-end manufacturing sector, said Nie Pingxiang, a researcher at the Beijing-based Chinese Academy of International Trade and Economic Cooperation.

"With increased productivity and well-developed infrastructure, China has been, is, and will remain a global manufacturing hub," Nie said.

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