The Chinese paints and coating industry was not hit by the worldwide economic downturn until September last year, and it's expected to recover by early next year with the help of greener products, according to marker research from Frost & Sullivan.

China, which is the world's second largest paints and coating market after the U.S., saw overseas orders decrease by more than 20 percent, and the growth in domestic demand slowed as well. The sector saw decreases in major types of coating like architecture and wood coatings, and also a drop due to lower exports from related industries like plastic toys, shipping and machine tools.

Regulations like the European Union's REACH (Registration, Evaluation, Authorization and Restriction of Chemicals) legislation will cause paints and coating companies to upgrade their technology and products, incurring additional costs, but will also help them move towards greener products, such as powder coating, water-based coating and thermal insulation coating.

"Compliance to the regulations will directly add to costs and reduce profit margins, influencing both imports and exports on the whole value chain of coating industry," said Rodger Yang, Frost & Sullivan's China consulting analyst of chemicals, material and food practice. "However, it has positive effects on the sustainable development of the market. Bearing the merits of healthy, environmental friendly, and energy saving, green products are being stressed in accordance with the global trend."

The market share for green paints and cleaners - those that use fewer or no harsh chemicals or can help achieve resource efficiency - are expected to see high growth from now until 2011, in spite of the economy. Output for the overall Chinese paints and coating industry is expected to start seeing double digit growth rates again in 2010.