Donnelley Opening Plant in Shanghai

R.R. Donnelley & Sons Co. will open a $30 million printing plant in Shanghai, China, broadening its presence in the newly opened Chinese market.

The new printing plant, recently approved by the Chinese government, will be a joint venture with the Shanghai Press and Publications Administration, an arm of the Chinese government. The facility primarily will print magazines, as well as directories and books.

R.R. Donnelley said it would maintain 100 percent operational control of the plant. Financial terms of the partnership were not disclosed.

The plant will employ about 300 people. Construction has begun, and operations are expected to begin late this year.

“This joint venture will provide new opportunities for Chinese publishers to develop their business and for Western publishers to expand into China,” said William Davis, chairman, president and CEO of R.R. Donnelley, Chicago.

R.R. Donnelley said it is the only Western printing company with facilities in China. The company has had a presence in Shenzhen, China, for 10 years, mainly producing directories.

China has proven attractive for R.R. Donnelley as the government has cut back on state censorship and opened the market, a company spokeswoman said. The nation's already immense and growing population presents untapped markets and new opportunities.

One direct marketing print buyer with a presence in China said he would welcome Donnelley's arrival in Shanghai. But he warned that the company would face a fierce fight to gain a piece of the Chinese print market.

The print industry has shared in China's economic growth explosion over the past decade, said Paul Condrell, general manager with Healthy Household Ltd., a direct marketing firm based in Guangshou, China. Total volume of print jobs has increased with the economy.

However, the average size of print jobs remains small, with little growth in the average run, Condrell said. Small, low-tech, printing companies using sheet-fed processes have sprouted as a result, and average book prints remain under 10,000, while average magazine circulations remain below 50,000, with page counts less than 48.

China's print capacity has exceeded demand, so direct marketers will find a high level of service, particularly because the average catalog print run is larger than most other jobs, ranging from 100,000 to 600,000, Condrell said. His company has been offered three- to five-day turnaround times, and paper costs are more than 60 percent of the printing bill.

In the future, Donnelley could gain an advantage by offering mailing services in addition to print, Condrell said. Most marketers handle lettershop services inhouse, fearing that local print shop employees might be tempted to steal data.

“Donnelley will have to deal with nasty competition,” he said. “It will have to innovate, bringing many new services in which it should be able to compete handsomely, but doing so will not be cheap.”

Other direct marketing firms have made recent inroads into China. Teradata, a division of NCR Corp., last month won a contract with China Construction Bank, Beijing, China's third-largest state-owned commercial bank, to build the nation's first enterprise data warehouse.

IBM recently began using Webcast technology to market its Websphere product to China's growing IT audience. Also, cell phone maker Nokia, in partnership with Chinadotcom, launched a wireless platform in China at the end of January.

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