The Architectural Coatings Market in China

China’s architectural coating industry, the largest global market on volume basis, is going through a transformational phase. After heady growth during the first two decades of the century, architectural coating producers are getting used to single-digit growth rates. Coatings World presents an overview of the Chinese architectural coating industry in this feature.

Overview of Architectural Coating Industry in China

Estimated to be worth USD $13.6 billion at the end of 2024, the Chinese architectural coating market is the largest global architectural coating market by a very wide margin. The industry – which is undergoing a major transformation – is grappling with low volume growth in most of the provinces in the country.

The most positive outcome of the transformation is leading to a steady increase in the share of high value added premium offerings.

The architectural coating industry growing in the range of 12%-15% per year was a norm between 1995 and 2015. However, since 2015, the yearly growth rate has continuously declined to reach about 6.3% in 2024.

Economically prosperous tier 1 and 2 cities accounted for about 71% of China’s architectural coatings demand in 2024. Inhabited with the younger generation, these cities have registered high overall economic development during the last three decades. These cities house 42% of the total population of the country.

China’s less economically developed tier 3 to 6 cities, which consist largely of towns and villages, accounted for about 29% of the architectural paint consumption in 2024. Collectively, these cities, towns, and villages account for 45% of the country’s population. With increasing urbanization and rising per-capita consumption, these under-served areas, particularly tier 5 and 6 cities, present significant growth potential for Chinese architectural coating producers.

Despite being the largest global market per capita (estimated at 6.1 kgs in 2024), consumption of architectural coatings is relatively low in China compared to US and Western European countries. Current low per capita consumption offers significant potential for growth, particularly in tier 3 – tier 6 towns and rural areas.

The repainting sub-segment is emerging as a key demand driver of the overall architectural coating industry in China, as an average household repainting exercise is carried out every 3.2 years in Western economies, compared to about 6.8 years in China. At the start of the century, there was a vast gap in repainting in the West and China, but this gap is narrowing.

In comparison to the repainting sub-segment, demand from new constructions has been a big dampener for the country’s architectural paint industry. Sales of new homes shrank to 9.7 trillion yuan (US$1.4 trillion) in 2024, less than half the levels recorded in 2021, according to government data, thereby impacting architectural coating demand.

Foreign companies play a major role in the Chinese architectural industry, accounting for more than 50% of coatings sales in this sub-segment. Relying on established brands and technology, these producers have focused on premium and high-end offerings. In contrast, domestic companies – both mid-sized and smaller producers – dominate the economy and the lower end of the market. The lower premium and upper economy is the main battleground for foreign and domestic producers, wherein both sets of producers have introduced multiple offerings in recent years.

Nippon Paint China, AkzoNobel, ICI Paint, Beijing Red Lion, Hampel Hai Hong, China Paint, Camel Paint, Shanghai Huli, Wuhan Shanghu, Shanghai Zhongnan, Shanghai Sto, Shanghai Shenzhen and Guangzhou Zhujiang Chemical are key producers in the architectural segment.

There is no doubt that China’s architectural coating industry is facing multiple headwinds. In addition to economic and construction slowdown, the US-China tariff tussle introduced by the Trump administration is also expected to play a key role in overall demand. Tariffs have heightened uncertainty for China’s construction industry, which is expected to weaken architectural coatings demand during the second half of the current year.

Slowdown and Evergrande Woes

Architectural coatings and GDP growth are highly correlated. After heady growth of 8+ % and above for more than 15 years, the Chinese economy has entered into maturity phase, registering about 4.5%- 5% annual growth rate during the last five years. It has faced several challenges such as property crisis, deflationary pressures, and slower overall growth compared to the last decade. All of these factors have had a direct impact on the production and consumption of architectural coatings in the country.

The construction sector and architectural coating industry are highly correlated. China’s construction sector, which has been a significant economic driver, and the Evergrande crisis have dealt significant blows to the architectural coating demand in China during last three years.

The country’s largest property developer precipitated the property and economic crisis when it defaulted on its debt in 2021. The country’s property sector continues to feel the effects to date. With total liabilities of 2.39 trillion yuan ($333 billion), Evergrande filed for bankruptcy in 2023.

Consolidation Drive

The entry into the maturity phase inevitably gives rise to consolidation in any industry. The Chinese architectural coating industry is no exception. Dotted by hundreds of small architectural coating producers, a majority of which are concentrated in one or two provinces, the Chinese coating industry is undergoing a consolidation drive to improve efficiency, increase market concentration, and enhance its domestic and global competitiveness.

Consolidation in the industry helps to rationalize production, eliminate inefficient players, reduce overcapacity, achieve economies of scale, and enhance producers’ bargaining power in raw material procurement.

The consolidation drive in the country’s architectural coating segment has involved mergers, acquisitions, and strategic partnerships, driven by government policies and the need to address overcapacity and promote technological advancements.

In 2023, AkzoNobel acquired Huarun’s decorative coating business from Sherwin-Williams for a consideration of €72 million. Huarun generated annual business of nearly €100 million at the time of acquisition.

“Acquiring the Chinese decorative paints business from Sherwin-Williams will help us to deliver our growth ambitions in tier 3 to tier 5 geographical areas in China. This intended acquisition is a strong strategic fit and our current business is best placed to unlock the full potential, thereby offering new opportunities for employees and customers,” AkzoNobel CEO Greg Poux-Guillaume said at the time of acquisition.

However, despite the consolidation drive of the last ten years, the Chinese architectural coatings market is still highly fragmented, with a number of small and ultra-small players. These smaller players are highly competitive in one or two provinces and offer their products at a much lower price, which poses a significant challenge to the larger players and multinational coating producers in the country.