Affected by the policy of the country's largest plastic bag maker to stop production and transfer

In the lead-up to the Spring Festival, Zhou Xiaobo, the general manager of Chengdu Zhongjia Color Masterbatch Co., Ltd., a supplier of color materials for plastic bags, received an unexpected letter. The letter, signed by "Henan Huaqiang Plastic Co., Ltd.," stated that due to national policy changes and other factors, the company would be ceasing production and liquidating its business. It also expressed hope for understanding from its suppliers. This announcement came alongside news that Huaqiang had put itself up for sale at a valuation of 2.8 to 3.5 billion yuan. For over a decade, Huaqiang had been the largest manufacturer of plastic packaging bags in the country, with an annual output value of 2.2 billion yuan. Now, it was suddenly hitting the "stop" button. The sudden shutdown led to a massive inventory clearance. Chengdu Zhongjia, one of the eight major color masterbatch suppliers to Huaqiang, had been supplying exclusive color materials for Huaqiang’s plastic bags for eight years. According to Zhou Xiaobo, Huaqiang operated two branch factories in Luohe, Henan, and Fuping. After the liquidation notice, the Luohe branch began selling off its stock, potentially worth millions of yuan. Professor Li Shu from the School of Economics at Southwest University of Political Science and Law explained that "liquidation" does not necessarily mean bankruptcy. While bankruptcy implies insolvency and forced closure, liquidation can be a voluntary and orderly shutdown without debt issues. As part of the transition, Huaqiang announced the transfer of its Luohe and Fuping branches. The post-tax transfer price was estimated between 280 million and 350 million yuan, depending on the buyer. Reports indicated that staff from the Guangdong headquarters confirmed the production halt, and workers had already begun dispersing. Industry analysts remain skeptical about the acquisition. Although Huaqiang has no debts and a high annual output, many believe the new regulations pose a significant challenge. Most of their products are ultra-thin plastic bags, which will be banned under the new national regulations starting June 1st. The company's expensive blow molding and film-making machines are now considered obsolete and cannot produce compliant products. Moreover, Huaqiang’s three-year supply contract with Chengdu Zhongjia was set to renew in October, but the new regulations have forced early asset liquidation. The timing aligns with the implementation of the new Labor Law and local policy discrepancies, further contributing to the decision. Huaqiang was established in August 1995 by Guangdong Nanqiang Plastics Co., Ltd., with an initial investment of 60 million yuan. Over 12 years, it expanded to cover 430 mu of land, operated nearly 10,000 sets of blown film and bag-making machines, and produced 250,000 tons annually, reaching a total output value of 2.2 billion yuan. It had held the top position in the plastic bag industry for 11 consecutive years. Experts believe Huaqiang’s shutdown is a positive step for environmental protection. Zhang, Secretary-General of the Chongqing Plastics Industry Association, praised the move as a responsible response to the national plastic ban. He emphasized that while the company may suffer short-term losses, transitioning to eco-friendly plastic bags could open up a huge market. Similarly, Zhou Lian, head of Chongqing Lianfa Plastic Raw Materials Industry Co., Ltd., noted that Huaqiang’s exit created a significant gap in the plastic bag market, valued at over 20 billion yuan, offering new opportunities for other manufacturers. For suppliers like Chengdu Zhongjia, the shutdown is a major disruption. However, they remain hopeful that if Huaqiang transitions to green products, they may continue their partnership. As the situation unfolds, all eyes are on what comes next for this once-dominant player in the plastic bag industry.

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