Xinhua Insight: Ballpoint pen conundrum underscores need for upgrade

Over 40 billion ballpoint pens are made in China every year. Yet, the key materials and equipment are, for the most part, imported.

Manufacturers in Zhejiang Province's Fenshui Township in Tonglu County have produced pens for over 40 years. Around 40 percent of "Made in China" ballpoint pens begin life in one of the township's 700 factories.

Chen Bin, general manager of stationery company Chenle, said the town's manufacturers are still lingering at the low end of the industrial chain. "We mainly do the assembly work and companies struggle with a thin profit margin," he said.

According to Ding Zhangrong, president of Guanghua, another stationery company, manufacturers make less than 0.10 yuan (about 1.5 U.S. cents) on each ballpoint pen.

Chen Sanyuan, from the China Writing Instrument Association, explained that the tip and ink are the most important components.

"Traditionally, it took more than 20 processes to produce a single pen tip," he said. "In order to meet the growing demand of the overseas market, Chinese producers have abandoned domestic processes and instead use more efficient Swiss equipment."

However, the imported equipment has higher material and ink requirements, and Chinese producers must turn to importing from Japan or Germany, he said.

Wang Hongfu, a manager with Zhejiang Wenjue pen factory, said the company started to import equipment in the 1990s. Each machine, which cost over 4 million yuan, hit profitability hard, and profit margins have been further squeezed due to market competition.

According to the association, a program to move the industry up the value chain was launched in China in 2011, and a series of breakthroughs have been achieved.

Chen Sanyuan said, "We have successfully mastered the production of the steel components for pen tips, and developed two types of pen tip production equipment, as well as several ink production lines."

Whiles these developments have helped Chinese pen-makers reduce imports and pushed down the price of imported ink and steel, domestic firms are slow on the uptake.

"There is always a period of time before companies accept new technology and equipment," he said.

Yao Hezhong, an engineer with stationery company Chenguang, said the new domestic equipment still lags behind foreign machines in terms of quality and function.

LACK OF IMPETUS

Conversely, while China has developed high tech inventions such as spacecraft and atomic bombs, it lacks the technology to produce a simple pen.

On the surface, making a ballpoint pen appears to be a simple task, but it actually involves various industrial fields including chemical, machinery and steel, said Chen Sanyuan.

"Most pen factories do not have the ability, or money, to make the steel used to make the tip, so they import it," he said, "and for the steel companies, there is no impetus to develop the suitable technology as only a small quantity of their products go to the pen industry. Not to mention, profits are very low."

In addition, Ding Zhangrong said, intellectual property rights is another issue that hampers the development of ballpoint pen industry.

Ding's company once developed a new type of ballpoint pen, which proved popular. Too popular perhaps, because in no time at all more than 40 companies had copied it.

"The profit per pen suddenly slid to 0.40 yuan from 0.68 yuan, and we had to give up producing them," said Ding.

SCALING UP MANUFACTURING

The pen problem is a small insight into a larger problem faced by Chinese manufacturers -- a lack of core technology squeezing profits at a time when consumption ambitions are on the rise.

The challenge is exacerbated by China loosing its "traditional edge," such as demographic dividend. Making it all the more imperative that the country transform from a manufacturing giant to a manufacturing power.

Zhao Guangli, from Sciencenet.com, wrote in an online article that the ballpoint pen issue reflects a duel problem faced by the country -- overcapacity of low-end products and incapability to produce high-end ones.

Many industries are unable to produce core components. For example, engineering firms have to import sophisticated machines, electronic companies have to import chips, and machine tool makers have to import almost all of their major parts, he said.

There is a light at the end of the tunnel, thanks to a spate of measures designed to address the situation.

"Made in China 2025," which was rolled out by the State Council in May 2015, aims to scale up the manufacturing sector in the next decade with measures to encourage the modernization of processes.

The government is also channeling a lot of energy into supply-side structural reform, which focuses on better provision for high-quality goods and services and lower costs for businesses.

Chen Sanyuan suggested the government should encourage cooperation between companies, and research institutes, and IP protection should be made a top priority. Endi