September 13, 2005
China has been in the news extensively during the past couple of years, and developments in 2005 have intensified the focus on the world's most populous country. Chinese companies Hair and China National Offshore Oil Co. put in bids on U.S. companies (Maytag and Unocal); meanwhile, the People's Bank of China unhooked the yuan from the dollar in favor of linking the yuan to a basket of foreign currencies. This is the perfect time to embark on a tour to get a better understanding of the country's manfacturing capabilities, so FMA, TPA, and Thermatool Corp. teamued up to organize the tube- and pipe-oriented tour of the country.
It finally happened, and when most of us least expected it. While two Chinese companies, Haier and China National Offshore Oil Co. (CNOOC), were in the midst of bids to purchase two U.S. companies (Maytag and Unocal, respectively), the Chinese government took the plunge. While many were focused on the outcomes of the two potential mergers, the People's Bank of China changed its policy regarding the yuan's exchange rate.
Is this change going to have a significant impact on trade between the U.S. and China? Probably not. The economic impact is likely to be small because the change was small. Under the old system, the yuan was pegged at 8.277 yuan per U.S. dollar. Under the new system, the yuan reportedly is tied to the value of a collection of foreign currencies. After the bank changed its policy, the yuan appreciated to 8.11 yuan per dollar, a 2 percent change.
It is difficult to tell if this will lead to a more flexible exchange rate system. It was widely reported that the exchange rate would move within a 0.3 percent band each day, and the official price at the end of each day would be the midpoint of trading for the next day, which could allow the yuan (also known as the renminbi, abbreviated RMB) to change in value incrementally. However, the intentions of the People's Bank of China aren't clear. On July 26 it issued a statement claiming that some foreign news sources had "misled the public and even wrongly speculated that the revaluation of RMB by 2 percent was only the first step in a series of adjustments."
At the old exchange rate, 8.277 yuan to the dollar, the yuan was thought to be undervalued by anywhere from 15 percent to 40 percent. Various groups such as the China Currency Coalition had been clamoring for action on the part of the U.S. government to combat currency manipulation, and a bill introduced to Congress earlier this year threatened to slap a 27.5 percent tariff on Chinese imports unless the currency was revalued by the same amount. Unpegging the currency might diffuse some of the tension, but will it do more than that and usher in a new era in trade between the world's most populous nation and the world's largest economy? Maybe, but caution is warranted. First, it's a small change, and further, incremental changes are not guaranteed. Second, even incremental changes aren't likely to tip the balance of power by much. China has long been a dominant economic power in Asia, and it is likely to be a formidable economic powerhouse in international trade in the foreseeable future (see "A Short Look Back" below).
A Short Look Back
While the U.S. has had a large role in global commerce for many decades, China's role as a heavyweight in international trade dates back more than 2,000 years. Early evidence of China's role is seen in the Silk Road, a primary trade route in Asia that was used from about 200 B.C. until the 15th century. This 5,000-mile road (actually several roads) ran from the Chinese city of Ch'ang-an to various cities in India and the Middle East. Traders used this road to exchange a multitude of items such as spices, precious metals, pearls, textiles, coral, ivory, horses, jade, wools, gems, glassware, olive oil, and wine. The route's name, the Silk Road, reflects the importance of silk—and China—in regional trade.
Despite all the attention exchange rates receive, this isn't the only important factor in international trade. Manufacturing capability is another.
Manufacturing capability is one of the pillars on which economic strength rests, so examining the state of a country's technology provides further insight as to its current and future industrial capabilities. This is precisely why the Fabricators & Manufacturers Association, International® (FMA), and its technology affiliate, the Tube & Pipe Association, International® (TPA), organized a manufacturing tour of China which is sponsored in part by Thermatool Corp. and the China Cold Roll-Forming Steel Association (CCRSA).
Tour participants will spend nine days touring factories in Shanghai and Guangzhou; attend a dinner hosted by the Shanghai Tube Association in Shanghai; and participate in the CCRSA 20th anniversary conference in Beijing.
Dec. 3 — Depart for Shanghai
Dec. 4 — Arrive in Shanghai
Dec. 5 — Factory tours; dinner hosted by Shanghai Tube Association
Dec. 6 — Factory tours; dinner hosted by Thermatool Corp.
Dec. 7 — Guided shopping tour; afternoon flight to Guangzhou
Dec. 8 — Factory tours
Dec. 9 — Free time; afternoon flight to Beijing
Dec. 10 — Cultural tour to the Great Wall, Ming Tombs, and Spirit Way
Dec. 11 — CCRSA Anniversary Conference; dinner hosted by CCRSA
Dec. 12 — CCRSA exposition; cultural tour to Forbidden City and Tiananmen Square
Dec. 13 — Depart from Beijing
CCRSA is a national organization in the tube, pipe, and other cold roll forming industries based in Nanjing. CCRSA emphasizes the need for international communication and cooperation and has helped many foreign companies enter the China market. CCRSA is celebrating its 20th anniversary in 2005 with a conference and exposition in Beijing. Tour participants will have a special opportunity to network with Chinese counterparts and attend educational presentations on the status of the cold roll forming market in China, how the cold roll forming industry will develop in China, and introductions to various advanced technologies and new equipment.
CCRSA members are primarily tube and pipe manufacturers with company sizes ranging from a dozen employees to more than 1,000 employees.
The name CCRSA in Chinese is Leng Wan, which means cold bending, not only from plate and sheet, but also from tube and pipe in various shapes. Both tube and pipe producing and bending factories will be represented at the CCRSA exhibition.
Guangzhou Steel Pipe Mill Co. Ltd. is the key branch company of Guangzhou Iron & Steel Group. The company received the State Second-Class enterprise as an honor in 1989 and gained certifications ISO 9002:1994 and ISO 9001:2000 in 1998 and 2001.
The production area is about 100,000 square meters. The main production equipment includes an advanced slitting line and high-frequency welding line imported from Germany and a tube threading line imported from Italy. The company's main products are electrowelded steel pipe; galvanized, electrowelded steel pipe; galvanized conduit; mechanical construction tube; general construction tube; and cold-bent formed sections. The company produces square, rectangle, round, and elliptic pipe in eight classifications and more than 200 varieties. The factory's annual capacity is 180,000 tons.
The company also supplies light- or heavy-duty scaffolding for construction, slitting or cross-cutting of metallic coils, electrowelding of steel pipe, and hot-dip galvanizing of steel pipe and steelware. This branch of the company also supplies a series of services, including goods hoisting and transporting, pipe and mechanical parts processing, steel and steelwares for construction, nonferrous metal, and building materials.
Guangzhou Pan Yu Chu Kong Steel Pipe Co. Ltd. (PCK) is one of the largest longitudinal seam-welded pipe manufacturers in the world and the largest steel pipe producer and exporter in China. Its products meet API, BS, JIS, ASTM, DIN, and GB standards. Its products are used widely for transferring crude oil, natural gas, liquid petroleum gas (LPG), coal slurry, and water. The company formed a joint venture with Hualong Oil Steel Pipe Coating Limited Co., which owns two pipe-coating production lines. These lines perform internal and external coating of single-layer fusion-bonded epoxy (FBE).
TPJ - The Tube & Pipe Journal® became the first magazine dedicated to serving the metal tube and pipe industry in 1990. Today, it remains the only North American publication devoted to this industry and it has become the most trusted source of information for tube and pipe professionals. Subscriptions are free to qualified tube and pipe professionals in North America.