Dynamics of Chemical

Industry and Globalization

Chemical Industry in China
 Eastern Asia, bordering the East China Sea, Korea Bay, Yellow Sea, and South China
Sea, between North Korea and Vietnam
LAND BOUNDARIES
 total: 22,117 km 
border countries: Afghanistan 76 km, Bhutan 470 km, Burma 2,185 km, India 3,380
km, Kazakhstan 1,533 km, North Korea 1,416 km, Kyrgyzstan 858 km, Laos 423
km, Mongolia 4,677 km, Nepal 1,236 km, Pakistan 523 km, Russia (northeast) 3,605
km, Russia (northwest) 40 km, Tajikistan 414 km, Vietnam 1,281 km 
regional borders: Hong Kong 30 km, Macau 0.34 km
 Literacy:
definition: age 15 and over can read and write 
total population: 90.9% 
male: 95.1% 
female: 86.5% (2002)
Government
Country name::People's Republic of China 
Government type: Communist state
Capital: Beijing
Legal system:a complex amalgam of custom and statute, largely criminal law;
rudimentary civil code in effect since 1 January 1987; new legal codes in effect
since 1 January 1980; continuing efforts are being made to improve civil,
administrative, criminal, and commercial law
Political parties and leaders: Chinese Communist Party or CCP [HU Jintao,
General Secretary of the Central Committee]; eight registered small parties
controlled by CCP
 Literacy:
definition: age 15 and over can read and write 
total population: 90.9% 
male: 95.1% 
female: 86.5% (2002)
Government
Country name::People's Republic of China 
Government type:Communist state
Capital: Beijing
Legal system:a complex amalgam of custom and statute, largely criminal law;
rudimentary civil code in effect since 1 January 1987; new legal codes in effect
since 1 January 1980; continuing efforts are being made to improve civil,
administrative, criminal, and commercial law
Political parties and leaders: Chinese Communist Party or CCP [HU Jintao,
General Secretary of the Central Committee]; eight registered small parties
controlled by CCP
 Key China indicators: GDP growth
After four years of 10%+ GDP growth, growth slumped in
the fourth quarter of 2008 to an annualized rate of 6.8%.
 China indicators: imports and exports
Rapidly falling exports and imports since September 2008
narrowed China’s trade surplus. Exports rebounded somewhat
in March. A Yuan-based cross border payment system could
bring new growth in trade
Overview
China Chemical Industry holds the third position in
the nation. Though it has got a ranking after the
Textile Industry and Machinery Industry, it
contributes almost 10% of China's GDP.
China Chemical Industry has established a
consistent growth path over the years. In 2004, it
recorded a 30% increase in production of
petrochemicals. This achievement awarded the
China Chemical Industry the tag of the fastest
growing industry in China
 Chemical Industry of China
 China has become the largest importer of chemicals and the third-largest
consumer of chemicals in the world.
 China's demand for industrial chemicals has already made it account for
15% of the market worldwide.
 Its outputs of sulfuric acid, ammonia, fertilizer, calcium carbide, dyes,
phosphate and synthetic fiber, and its consumption of polypropylene and
synthetic rubber all rank first in the world.
 2nd largest country for chemical consumption and ethylene production after
the U.S.
 “China's demand for petrochemicals and plastics is expected to rise
between 6% and 8% each year over the next decade, outpacing growth in
Asia (5.4%) and the world (3.6%) for the same period.
 China’s chemical industry as a whole is expected to grow at an average rate
of more than 10% through 2016.”
 Industry Classification
Segments characteristics Constituent industries
Basic - high volume - petrochemicals
- limited product - fertilizers
differentiation - organic chemicals
- other industrial
chemicals
Specialty - typically small production - adhesive sealants
units - catalysts
- high production - industrial gases
differentiation - plastic additives
- low capital investment
Knowledge - differentiated chemical and - agrochemicals
biological substances - pharmaceuticals
- high investments in R&D - biotechnology
and marketing
 Industry Classification

Basic chemicals dominant in Market share 2004,

China %
13.9
Organic and inorganic feed stocks

3.8
Agrochemicals

Polymers 47.6
Pharmaceuticals 3.5
Paints and lacquers 23.2
Detergents and body 1.1
care products
Other chemicals 6.9
Major Chemical Products Output
Major Chemicals
Import and Export of Selected Chemicals
Import (US$ Growth (%) Export (US$ Growth (%)
billion) billion)

Organic chemicals 30.8 7.3 12.7 36.6

Specialty 7.4 -7.5 4.1 -21.8

chemicals
Inorganic 6.0 28.2 7.6 10.4
chemicals
Paint and dye 3.5 14.0 3.0 20.7

Rubber product 3.2 54.7 18.2 24.8

Fertilizer 2.5 -18.2 1.2 15.1

Synthetic material 1.8 13.8 4.5 39.5

Chemical ore 0.8 -8.4 0.5 -7.4

Pesticide 0.2 16.8 1.0 -25.7

Other 32.4 25.5 0.6 17.4

Top 10 Chemical Companies
in China
Most of these companies are state-owned.
As the chemicals industry occupies a key position in the
economy, the Chinese government continues to actively steer
market entry for foreign companies.
The best possible foreign investment currently is a joint
venture with a Chinese partner. To avoid economic
overheating, the government has recently established entry
barriers for selected industries.
The basic chemicals market and especially the market for
petrochemicals are affected. Only major projects with a
production volume of 800,000 tonnes p.a. are currently being
permitted.
Regional Disparities By output
(top 15 provinces, Unit: million ton)
 Tariff on Chemicals
China joined the World Trade Organization in 2001, which committed it to cutting
tariffs on chemicals. In coming years, this could expose weaknesses in various parts
of the domestic chemical manufacturing center.

- obstacles for chemicals imports have been reduced largely.

- Now, Chinese companies at least are no longer obliged to buy raw
materials primarily in their home country.
- Liberalization progress due to the new membership eliminated structural deficits
and highly improved the quality of China as a business location.
- import tariffs for more than 1,000 chemicals were reduced from 15% to 7%,

Regulatory Policies (REACH Agreement, June 1, 2007)

Global Chemical Industry
Global Chemical Industry=$2.4 trillion
Japan
EU Africa 9%
31% 1% Asia
7%
India
2%
Korea
4%

China
10%

NAFTA
Rest of Europe 25%
5% Latin America
5%
 Future Prospects
As a result of all these initiative, the Chinese
Economy is expecting that China Chemical Industry
will be able to increase its world market share to 13%
from present 10% within 2015.

According to a Deutsche Bank survey, China Chemical

Industry is going to experience a tremendous Growth
Boom in the near future which will place China
Chemical Industry in the rank of second largest
Manufacturer of Chemicals only after U.S.
Chemical Turnover in China Booming
1000
900
800
700
600
EU-25
500 China
400 Germany
300
200
100
0
2004 2005 2010 2015
Chemical Turnover Forecast
USD billion

2004 2005 2010 2015

EU-15 559 581 700 851
Germany 142 149 172 200
EU-10 27 28 38 51
EU-25 586 610 737 902
USA 415 430 510 606
Japan 186 186 186 186
China 137 151 243 392
India 48 51 76 111
World 1,776 1,865 2,380 3,038
 Entry of Foreign Players
Since 2005, the chemical market in China has become the third largest
market after the U.S. and Japan in terms of industry output, reaching
US$223 billion.
The FDI in China’s chemical industry has been the highest in the world
for five successive years.
After joining the World Trade Organization, China has made it easier
for foreign companies to enter the domestic market.
This has forced domestic enterprises to face competition from foreign
players, at a time when they were changing their strategy to focus on
capital output instead of goods output.
The foreign players have acquired mature technology for the
production of some chemicals which are still considered “new
materials” by domestic companies (e.g. silicone, polyurethane and
engineering plastics).
While domestic companies are still in their research and development
stage, foreign rivals have already entered these markets.
 CHINA MARKET POTENTIAL
1. SICHUAN
- POPULATION: 87,250,000
- CAPITAL: CHENGDU,
1,000,000

2. HUBEI
- POPULATION: 60,160,000
- CAPITAL: WUHAN,
9,700,000

3. HUNAN
- POPULATION: 67,000,000
- CAPITAL: CHANGSA,
6,100,000

4. CHONGQING
- POPULATION: 31,000,000
 Entry of Foreign Players
 Dow Corning (US) and Wacker (Germany) have set up factories in China to produce 200,000 tons of
siloxane and fumed silica per year.
 Titanium dioxide is one of China’s key exports but none of the domestic companies have mastered
the chlorination technology. DuPont from the U.S. has started to build a 200,000 ton titanium dioxide
facility with chlorination technology in Shandong Province, which is three times bigger than the
largest domestic factory. The Australian Astron also signed an agreement with Liaoning Coastal
Industrial Base in 2008 to build a 400,000 ton titanium dioxide facility in Yingkou City.
 In the polyurethane field, after Germany’s BASF and U.S.’s Huntsman set up their 240,000 ton MDI
and 160,000 ton TDI facilities in the Shanghai Chemical Park in 2006, BASF built a new 400,000 ton
MDI factory in Chongqing, which will commence operation in 2010. Germany’s Bayer is also building
its 350,000 ton MDI and 160,000 ton TDI facilities in the Shanghai Chemical Park, and plans to launch
them in 2008 and 2009 respectively.
 In the polycarbonate (PC) field, Bayer is now constructing its 100,000 ton PC unit in the Shanghai
Chemical Park and plans to expand its capacity to 200,000 tons by the end of 2008. Japan’s Teijin has
also set up two 50,000 ton PC units in Zhejiang and intends to build a new 60,000 ton unit which will
commence operations by March 2009. GE Plastic will cooperate with CNPC to build PC units using
the non-phosgene, melting method.
 In other chemical fields, multinationals are also strengthening their direct investment in China. By
the end of 2005, the world’s top 10 tire manufacturers had all set up their factories in the country.
Their total output volume reached 76 million units in 2006, accounting for 30% of the nation’s total
tire output. The multinationals also bought nearly
Chemical Industrial
Parks in China
 Chemical Industrial Parks in China
In China the chemical industrial parks (CIPs) are
special zones which focus on one industry, namely
chemicals.
Chemical industry parks were set up as satellite sites
at Economic and Technological Development Zones
(ETDZ) or as separate, independently operated
industrial parks.
The main goals include restructuring and
improvement of technological standards in the
Chinese chemical industry and promotion of regional
economic development by making investment more
attractive to foreign and domestic companies
 Chemical Industrial Parks in China
China's chemical industrial parks have grown along
with the nation's economy.
China Petroleum and Chemical Industry Association
(CPCIA) in 2004 listed 17 chemical industry parks in
China.

The locations Shanghai (Caojing), Nanjing und Tianjin

(TEDA) are national level parks, and the others are
managed at the provincial level.

Most chemical industry parks are in the eastern coastal

regions.
Chemical Industrial Parks in China
Compared to ordinary industrial zones in China,
chemical zones have the advantage of being able
to provide investors with:

industry-specific infrastructure, such as

well-established industrial waste and water
treatment facilities,
high-standard warehousing facilities for chemical
materials storage, and
effective bulk transportation networks.
 Chinese (national level) Chemical
Industrial Parks
Chemical State(s)/ Total Available No. of Highlights/
region Province industrial space [ha] sites specialties
Industrial surface area
zone [ha]
TEDA/TED Tianjin 12,260 2,700 five fine chemicals
A West
Nanjing Jiangsu 4,500 Changlu: one basic and fine
(two sites) 2,600 chemicals,
Yudai: 1,900 polymers,
pharmaceuticals
petrochemicals,
logistics
Shanghai Shanghai 2,940 2,940 three petrochemicals,
(Caojing) (sites) polymers
 The Tianjin Economic and
Technological
Development Area (TEDA)
As one of the first national development zones the TEDA was
founded in 1984.
 It is located 40 km from Tianjin and 120 km from Peking.
The principal industries in the zone are:
- telecommunications (61%),
- machinery manufacturing and car production (25%),
- biopharmaceuticals (5%) and
- food (6%).
The TEDA’s specialized industrial parks:
1. the Microelectronics Industrial Park (4.6 km2),
2. the Yat-Sen Scientific and Industrial Park (10km2)
3. the Chemical Industrial Park (27 km2).
 Main Chemical Industrial Parks
in China
1.Shanghai Chemical Industrial Park

2.Jiangsu Taixing Chemical Park

3.Ningbo Chemical Industry Park

4.Jiangsu Yangtze River Chemical Industrial Park

5.Changjiang International New Chemical Materials Industrial Park

6.Chongqing Changshou Chemical Industrial Park

7.Shenzhen Fine Chemical Industrial Zone

8.Guangdong Maoming Petrochemical Industrial Zone

Main Chemical Industrial Parks in China
1.Shanghai Chemical Industrial Park
China's first industrial zone specialized in the development of
petrochemical and fine chemistry businesses in China.
Total area of 29.4 km2
Total investment (2007) was USD 100 billion and is home to major
multinational companies in the chemical industry including Bayer, BP
Amoco, Mitsui Chemicals, Huntsman, Vopak and BASF Chemicals.
2. Jiangsu Taixing Chemical Park
Established in 1991, located in Jiangsu Taixing Economic
Development Zone,
Over its 16 years of development, the zone has attracted over 142
enterprises, of which 32 are foreign-invested or joint ventures
companies.
 Cont…
3. Ningbo Chemical Industry Park
Provincial chemical industry park established in 1998.
With a total area of 56 km2, the park enjoys a powerful
transport network with national highway 329 and the
Hangzhou Harbor Bridge nearby.
According to the 2002-2010 development plan, the zone will
give priority to oil refinery, fine chemicals, composite
materials and the high polymer material industry.
more than 70 enterprises, including LG Yongxing Chemical,
Zhenghai Petroleum & Chemical, Hangzhou Bay Acrylic
Fiber.
 Cont…
4. Jiangsu Yangtze River Chemical Industrial Park
The Park was established in 2005 as a provincial zone in
Jiangsu, located in Zhangjiagang Free Trade Zone (46 km2)
Has 4 petrochemical terminals and can provide investors a
convenient transport network and high-standard storage
facilities.
The primary focus of the chemical industrial park is fine
chemicals.
over 500 enterprises since 2002 and is home to China's
largest market exchange for liquid chemicals.
 Cont…
5.Changjiang International New Chemical Materials Industrial
Park
Location in the Jiangsu Nantong Economic Development Area
(NETDA), a national level industrial zone in China.
one of the four specialized parks in NETDA, (2 km2)
the park has built five ten-thousand ton freight terminals and 530,000
m3 of chemical storage tanks.
Major investors Japan OJI Paper, CJ China and Mitsubishi Rayon.

6.Chongqing Changshou Chemical Industrial Park

Located in Changshou district of Chongqing, 2001.
Major investors include BP, Sinopec, China National Petroleum,
BASF, Linde Gas, Praxair, Dalkia, Degussa, and Mitsubishi Gas
Chemical.
 Cont…
7.Shenzhen Fine Chemical Industrial Zone 
With a planned area of 13.05 km2, Shenzhen Fine
Chemical Industrial zone is a relatively small park, but
with its location in the Pearl River Delta, one that enjoys a
convenient transport network.
The zone is only 37 km from Hong Kong's Sha Tau Kok
Port and 27 km from Shenzhen Yantian Port.
The zone specializes in the development of high-value
added and pollution-free fine chemical products.
Encouraged industries include new composite materials,
engineering plastics and specialty chemicals.
 Cont…
8.Guangdong Maoming Petrochemical Industrial Zone

Park was established jointly by the Maoming city

government and the Maoming Sino-petrochemical Group.
an area is 43 km2, has status of “Chemical Industry Base”
under China's National Torch program.
The industrial zone is also a production base for chemical
raw materials in China. By mid-2009, the zone had
attracted 23 projects worth a total investment of RMB 25
billion.
 Products
Polymers and plastics, especially polyethylene, polypropylene,
polyvinyl chloride, polyethylene terephthalate, polystyrene and polycarbonate
comprise about 80% of the industry’s output worldwide.
Chemicals are used to make a wide variety of consumer goods, as well as
thousands inputs to agriculture, manufacturing, construction, and service
industries.
The chemical industry itself consumes 26 percent of its own output.
Major industrial customers include rubber and plastic products, textiles,
apparel, petroleum refining, pulp and paper, and primary metals.
Chemicals is nearly a $3 trillion global enterprise, and the EU and U.S.
chemical companies are the world's largest producers
Sales of the chemical business can be divided into a few broad categories,
including basic chemicals (about 35 to 37 percent of the dollar output), life
sciences (30 percent), specialty chemicals (20 to 25 percent) and consumer
products (about 10 percent).
 Companies
The largest corporate producers worldwide, with plants in
numerous countries are:
- BASF,
- Dow,
- Degussa,
- Eastman Chemical Company,
- Shell,
- Bayer,
- INEOS,
- ExxonMobil,
- DuPont,
- SABIC,
- Braskem and
- Mitsubishi, along with thousands of smaller firms.
 Companies cont…
In the U.S. there are 170 major chemical companies.
They operate internationally with more than 2,800 facilities outside
the U.S. and 1,700 foreign subsidiaries or affiliates operating. The
U.S. chemical output is $400 billion a year.

In Europe, especially Germany, the chemical, plastics and rubber

sectors are among the largest industrial sectors. Together they
generate about 3.2 million jobs in more than 60,000 companies. The
chemical sector accounts for 12% of the EU manufacturing industry's
added value.

Instrumental in the changing structure of the global chemical industry

has been the growth in China, India, Korea, the Middle East, South
East Asia, Nigeria, and Brazil.
Global Trends in Chemical
Industry
The main characteristics of the chemical
industry competitiveness
The chemical industry has some unique characteristics
which have to be taken into account in a competitiveness
analysis
Globalised industry
Innovation-driven and knowledge-intensive
Integrated along the value chain into its downstream
industries, or directly to consumers
Capital-intensive
Energy intensive
Long product development time, requiring stable and
predictable policy framework
 Chemicals are a truly globalised industry in
which competition takes place at a global level

Production value growth chemicals excl

pharma p.a. 2000 - 2006
Total trade growth chemicals excl pharma
p.a. 2000 - 2006
Markets are booming around the world, with average growth rates
p.a. of trade and production of up to 25% in certain countries
More than 45% of the value of the global chemical industry is traded.
Over 35% of this world trade is intra-company in nature.
Global competition in the chemical industry is
beneficial, if everybody competes on equal and
fair terms
Competition in the chemical
industry takes place on all levels:
Trade – from and to Europe
Investment - building up a
presence sales and production
High growth markets are mainly
in non – OECD countries
But growth in other parts of the
world is not a zero sum game, as
long as any player can benefit
from it
Thank you
 But, China’s chemical industry also
faces challenges
Infrastructure
Shortage of electricity
After years of growth founded on exports:
• Finished export demand has weakened
• Costs are rising (feedstock, environmental protection, labor),
weakening margins in some areas
• Domestic demand is rising, but slowly and unevenly, and is not
enough to make up missing exports
• The product mix is uncompetitive and in need of revamping
• New startups in the Middle East and China threaten to cause
massive overcapacity
 Impediments to growth
Energy shortage is a brake
Transport also a bottleneck
In China, insufficient freight capacity and the road and rail
infrastructure, which have been poor for a long time, are
increasingly hampering industrial development. It is the
chemicals industry in particular that is dependent on
roads in China that are heavily travelled. Rail
transportation seems a possible alternative and is
inevitable in some remote areas, but the rail network,
similar to the roads, is strained to the limit and in even
worse state.