Kuraray has reached an agreement with the Chinese firm Zhejiang Hexin Industry Co., Ltd. (Hexin) regarding the establishment of a joint venture in China to manufacture man-made leather, and will soon be inking a joint venture contract. Construction of a factory with an annual production capacity of 4 million square meters will begin upon receipt of approval from the Chinese government, and operations are scheduled to commence in the spring of 2005.

Kuraray's microfiber man-made leather CLARINO is used throughout the world in shoes, bags, balls, gloves, clothing, and interior furnishings, and holds the top share of the world market for man-made leathers. Kuraray--having long watched the scope and promise of the Chinese market--commenced full-scale development of its operations in the Chinese market with China's 2001 admission to the WTO. At this time Kuraray established a cooperative relationship with Hexin--China's largest manufacturer of synthetic leathers.

Subsequently, the two companies entered into negotiations regarding the construction of new manufacturing facilities to meet sharply rising demand. These negotiations led to an agreement to establish a joint venture company to manufacture microfiber man-made leathers for China's domestic demand, primarily for application in shoes and interior furnishings.

This alliance will further Kuraray's penetration of the Chinese domestic market and boost the Company's cost competitiveness, which Kuraray believes will strengthen its foundation for worldwide expansion. On the other hand Hexin will benefit from a smooth entry into the microfiber man-made leather business, becoming a full-spectrum manufacturer of man-made leathers and solidifying its position as China's top synthetic leather manufacturer.

With an eye toward expansion as China's domestic demand rises, as well as the development of worldwide sales, the new joint venture's manufacturing systems will be linked with those of Kuraray's Okayama Plant.

New Company (projected)

Company name Hexin Kuraray Micro Fiber Leather (Jiaxing) Co.,Ltd.
Business Manufacturing and sales of man-made leathers
Location Asian-Pacific Industrial Area, Jiaxing City, Zhejiang Province (area of site, approximately 66,000m²) .
Chairman YunPing Shen (Hexin President)
Establishment May 2004
President Jianhui Gu (Hexin Vice-president)
Capitalization US$10.5 million (approximately ¥1.2 billion; Hexin 66.6%, Kuraray 33.4%)
Employees approximately 140
Net sales approximately ¥3 billion

New Company (projected)

Production capacity 4 million m² per year
Commencement of operations April 2005
Capital investment approximately ¥1.6 billion

JV Partner

Company name Zhejiang Hexin Industry Co., Ltd.
Business Manufacturing and sales of synthtic leathers
Location 435 Town East Road, Jiaxing City, Zhejiang Province
Established 1988 (first established as a state-owned company; completely privatized in 1998)
Chairman Shanzhong Zhu
President YunPing Shen
Capitalization approximately ¥1.0 billion
Employees approximately 1,600
Net sales approximately ¥8.5 billion (consolidated, fiscal year ended December 31, 2003)