In the paint industry, even though this year’s targets have been met, the path to success has remained challenging. The architectural coatings market is increasingly saturated and under pressure. Unregulated companies and non-brand players continue to disrupt the market by engaging in cutthroat price wars. Established enterprises are struggling to maintain their position, often facing rising operational costs. A senior executive from a well-known Chinese paint company shared this sentiment when discussing the current state of the paint market with the author. Similar complaints are common, but they often reflect a sense of helplessness.
Before speaking with industry professionals about the development of the real stone paint market, the author became acutely aware of the temptation of low prices. “Even if your real stone paint product is just a few cents more expensive per kilogram, it might be rejected by construction firms,†one business leader said. “And your contracts could easily be taken over by companies that don’t follow the rules.†In this environment, legitimate businesses are losing out to unscrupulous players who thrive on low prices. This imbalance is driven by the fact that smaller, less regulated companies often operate at lower costs, sometimes at the expense of quality and safety.
China is home to nearly 10,000 paint companies, most of which are small or medium-sized. Many operate in workshop-style settings or share production facilities. Some invest little in research and development or advanced equipment, resulting in significantly lower production costs. However, this cost advantage often comes at the expense of product quality, leading to frequent issues in the market. These problems not only harm consumers but also damage the reputation of the entire industry.
Formal enterprises, on the other hand, bear the burden of corporate, social, and environmental responsibilities—such as R&D investment, equipment upgrades, employee benefits, and tax compliance. These costs make it difficult for them to compete on price. Meanwhile, rule-breaking companies avoid these expenses, allowing them to undercut competitors and gain an unfair advantage. As a result, the technological innovations, high-quality products, and superior services of responsible companies become liabilities rather than assets.
The rise of unregulated players stems from flaws in China’s regulatory system and the lack of clear industry standards. Government enforcement has often been weak, allowing unethical practices to persist. While new policies such as the revised “Titanium Dioxide Industry Access Requirements†are expected next year, many industry observers remain skeptical. Although these measures may promote consolidation and improve standards, the long-awaited “Administrative Measures for the Coating Industry†and “Access Requirements for the Coating Industry†have yet to be implemented.
Moreover, the absence of comprehensive regulations has led to confusion in the market. Functional coatings, for example, lack standardized definitions, allowing companies to mislead consumers with vague or exaggerated claims. This lack of oversight results in substandard products and frequent quality inspection failures. When quality issues arise, consumers lose trust in domestic brands, favoring foreign alternatives instead. This not only harms individual companies but also tarnishes the image of the entire industry.
The “bad money drives out good money†phenomenon is becoming increasingly evident in the paint sector. Honest, innovative companies find themselves squeezed out by those who rely on cheap labor, false advertising, and price manipulation. Over time, fair competition erodes, and more companies adopt lower standards to survive. Eventually, the market becomes dominated by unscrupulous players, leaving ethical businesses struggling to stay afloat.
This dynamic mirrors the economic theory of Gresham’s Law, where inferior products drive out superior ones. In the paint industry, the same principle applies: honest, quality-focused companies are often pushed aside by those who exploit loopholes and prioritize profit over integrity. The result is a cycle of declining standards, consumer distrust, and long-term harm to the industry.
For the paint industry to transform and grow sustainably, stronger regulations, clearer standards, and stricter enforcement are essential. Without these, the industry risks falling into a vicious cycle where poor practices prevail, and true innovation is stifled. It's not just a problem for individual companies—it's a challenge for the entire sector, and one that demands urgent attention.
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