All eyes on China

China is on track to become the largest global economy by 2016, even though 2012 saw its slowest growth for years, with a rise of 7.8%, which is well below expectations. Growth in 2013 is predicted to increase moderately to 8.4%.
In preparation for global trade, the Chinese government has implemented financial reforms that will move the country towards market-based financial instruments and interest rates, and restrictions on capital inflows and outflows are being eased, according to the OECD.
At the same time, the amount of money that the population has to spend is on the rise. Close to a quarter of the population now lives in cities where income per capita is as high as in some OECD countries.
The signs of reasonable affluence are noticeable in larger cities and tourist areas, says Chris Tebbs, executive director of the International Drycleaners Congress. "Western influences are everywhere, from fast food outlets to designer clothing stores.
"This latter trend is clearly having an impact on drycleaning businesses and is probably responsible for growth in franchise and group outlets such as Fornet, Pressto, Hanor Leather Cleaning and Elephant King."
Marco Niccolini from Renzacci sees China as divided into two separate "countries" one consisting of the larger, more affluent cities and the other of small- to medium-sized cities where western-style drycleaning has yet to make its mark.
Tebbs says consumers in the larger cities want modern drycleaning shops based on the European design with European-style equipment. This applies particularly to the business, tourist and ex-pat areas.
These shops use simplified finishing tables rather than scissor presses, as well as smaller drycleaning machines. As in Europe, these shops often offer a range of services including tailoring, ironing and laundry.
Only a few drycleaning shops are independent. Around 5% are high-end stores and 45% are medium-sized, with the rest low-end establishments, says Gabriele Cuppini from the Italian manufacturer Union. He believes that there will be a move towards medium and high-end stores because those at the lower end cannot afford the rents or the labour.
Cuppini reports that the big four and five-star hotel chains have adopted modern on-premise laundries?(OPLs) and offer a range of services to guests.
He adds that there is a big demand for imported products if the local market cannot provide an equivalent. Some five star hotels have imported all their equipment and some drycleaning stores only use Italian equipment.
At Renzacci, Marco Niccolini says that the company's main sales in China are 12 - 15kg perc drycleaning machines and washer-extractors of a similar size.
But despite the demand for modern equipment, Niccolini notes that open-circuit drycleaning machines are still the norm in less affluent areas. These are either used machines or made by local Chinese companies.
Tebbs takes a similar view. He says that while there a steady demand for European and western branded equipment, Chinese companies such as Sailstar (Shanghai Sailstar Machinery Group) and Weishi (Shanghai Weishi Laundry Equipment Co) are growing in strength and had a greater presence at Texcare Asia 2011 than at the 2007 show. Other local manufacturers gaining in prominence include Sealion (Jiangsu Sealion Machinery Group) and Wuxi Wind & Sun New Energy Technology Co.
Sammy Tung, general manager for Girbau China, agrees, saying that the Chinese government has strategies to provide protection for local laundry manufacturers. On 1 January 2013, the import tax on washer-extractors with more than 10kg capacity rose from 6% to 10%.
He explains that most businesses want to use imported equipment because of the technology, quality, durability, low utility costs, efficiency and output performance.
However, when they compare the cost and find that a local machine is 65 - 70% cheaper they will choose locally made equipment to fit in with their budget, their financial arrangements or with government policy.
According to Tung, the main markets for importers are central laundries, which are gaining in prominence, and four- and five-star hotels (although he predicts that local manufacturers will increase their share from 30% to 50%).
He says that demand for imports is also coming from drycleaning and that this is likely to grow as environmental concerns take hold. He also sees the self-service launderette sector as a growth area. It has yet to mature but has long-term potential.
Some international companies have moved production to China to compete with the prices offered by local companies.
Milnor, for example, set up an agreement with Castic SMP so that the Chinese company would manufacture a range of Milnor washer-extractors under licence.
Now, Milnor is a joint venture partner with Castic and the full Milnor range is sold in China through Castic and its distributors.
"Strong GDP growth has fuelled the market for industrial/commercial laundry equipment and services," says Rick Kelly, Milnor's vice president sales and marketing administration. "China's coastal cities are well advanced in development and now it is China's policy to develop inland cities by constructing "high-speed" train networks to link up most, if not all, major cities.
He adds that the Chinese government is injecting trillions of RMB to build up the domestic market, as well as the export market.
This will enable more development around China, and increase the number of laundry and drycleaning businesses.
"China is not a difficult market if you have a good distributor but it is difficult to have a clear picture of the structure," comments Danube's Bernard Jomard. The company serves a range of customers including hotel chains, healthcare and some niche markets. Over the past three years the company's turnover in China doubled annually.
Lapauw sales network manager Brecht Gaillez is also optimistic. He still sees a lot of opportunities in China because there is demand from customers that want not just western brands but western-built machines.
Currently, Lapauw's main sales in China are to the hospitality sector but it also has its eye on opportunities in selling to central laundries and to government projects in the hospital sector. He believes that the country could see changes similar to those that have taken place in the Middle East where central laundries are replacing hotel OPLs.
The managements at these central laundries tend to prefer western-built machines.
Gaillez says that the Chinese government has plans to invest in healthcare and that involves building big hospitals.
He sees potential not only in the big cities but also in the development of the second and third tier cities where hotels are being built. Gaillez believes that in the next five to ten years, OPLs will become an important customer sector for his company.
The growth in tourism and therefore in hotel construction also holds potential.
Kitty Zhang, regional sales manager China & Mongolia for Alliance Laundry Systems, reports that over 70 five-star hotels opened in China in 2012 and that every international hotel management group in the country has a long list of hotels "to be opened". She says that more and more hotels are outsourcing laundry as this means they can then accommodate more rooms, restaurants and other commercial business.
However, Zhang thinks that hotels will still have a small laundry to provide a quick service for guests' garments.
Since 2000 when a German laundry company set up modern commercial laundry plants in Shanghai and Beijing, the quality of central laundries has improved, Zhang comments.
However, she warns that while western brands are important for a segment of the population, for the majority of consumers, price and "Mianzi"(which translates as face or reputation) are the factors that influence how money is spent and Mianzi is very important.
Laundry is not a "Mianzi" product but a "backroom" one so a hotel owner may spend a lot of money to buy a light fixture for his lobby rather than investing in laundry equipment.
The industrial and commercial laundry business is very price-sensitive. In the past, most tunnel washers in industrial laundries were imported but in 2011 a Chinese factory launched a range of tunnel washes. In 2012 it sold 12 of these locally made machines.

Environmental concerns
China has signed up to international environmental agreements and plays a major role in the development of international standards (it jointly shares the secretariat for ISO?TS38 Textiles).
However, many believe that the government has prioritised GDP growth over the enforcing of environmental protection and healthcare measures.
Thomas Yin, general manager of Jensen's sales and service centre in Shanghai, thinks that environmental protection may have to become more of a priority.
He says that there is growing concern about high energy costs, water scarcity in some regions, heavy smog in the cities and water pollution in Shanghai.
When a number of power plants in Beijing closed or moved away from the city, the laundries near these plants also had to move. The number of industrial steam suppliers is limited and sewerage exhaust standards will be more strictly monitored.
Yin also believes that stricter standards in healthcare and the medical sector will also come into play, as these sectors develop. As a result, there will be a demand for equipment that can meet high temperature requirements as well as for barrier washer-extractors.
The government is now monitoring the production of ironer rolls and chests. This follows a series of explosions in such ironers when the steam pressure was raised to produce high temperatures.
Misue Leung from Unifair, which organises Laundry Expo in collaboration with the China Laundry Association, says that "green" trends are having a greater influence over China's laundry industry and will feature at this year's show which takes place in Beijing, 8 - 10 August.
"Green" laundry has great potential in China," she says. "It is on the road to standardising and branding, as it now results in advanced equipment that uses the latest technology, scientific management and provides excellent services.
Gianluca Mainolfi, Ecolab's vice president marketing, global textile care, believes that it is only a matter of time before the government will introduce more stringent regulation. So in the next five to 10 years, the market will open up, not only for suppliers but also for textile services companies such as Lindström, Berendsen and others.

Rental move
At present end-users buy and own their textiles but Mainolfi thinks there will be a gradual trend to textile rental as the market moves to meet the standards required by the regulations.
Ecolab serves the upper end of the market, where the standards are already high. Although the products it sells to China are rebranded, they are the same as those sold in Europe and North America. At the lower end of the laundry market, the chemicals used are locally produced powders.
The company estimates the value of the industry, including the locally supplied powder, at around $1.5 - 2bn.
With little significant growth expected in either the European and North American markets in the near future, Ecolab will continue to invest heavily in China and Mainolfi predicts that China will be the market for the future.