China Market Insider China Catches up in the Fine Chemicals Sector
China is catching up in the fine chemcials sector. The communist state and party leadership in Beijing intends to use a series of targeted support measures to accelerate the development of the industry in order to become more self-sufficient towards foreign countries.
Beijing/PR China–The goals set by the central planners include the upgrading of two to three chemical parks. Ten leading companies are to be "cultivated" from now on, i.e. a kind of Chinese "national champions" with an annual turnover per company of ten billion yuan (around 1.4 billion USD). By next year, the national "fine chemicals rate", i.e. the share of fine chemicals in total chemical production in China, is to be raised to at least 50%.
Developed countries have been specializing more and more for a long time in high-quality chemical products such as chemicals for the electrical industry and the production of semiconductors, or high-quality polyolefins. The fine chemicals rate, an indicator of the level of development of the chemical industry, is between 60 and 70 % in Japan or Germany. China wants to catch up here.
The trade war between Washington and Beijing, but also the disruption of supply chains during the Corona crisis, have triggered a debate in China about more self-sufficiency in many key industries. At the same time as the debate on promoting the domestic semiconductor industry, there are now also increasing calls for greater independence from imports of the chemicals needed for its production. Without fine chemicals, there would be no Chinese high-tech industry, the argument goes.
Accoring to official statistics China is highly dependent on other countries for high-quality chemical products, high-end equipment in the chemical industry and leading technology. For example, the Chinese Ministry of Industry and Information Technology has warned that in 2018, 32% of all 130 basic chemicals could not yet be produced in China at all, and more than half of all fine chemical products would still have to be imported.
China's chemical industry is "big, but not strong" is the accusation currently circulating in China's media. Excessive production in the lower market segment contrasts with insufficient production of fine chemicals, laments the "China Chemical Industry News" in an analysis published earlier this month. China has therefore now set itself the goal of promoting the "innovation and development" of fine chemical products just as specifically as the use of environmentally friendly, "clean production processes". Ten new fine chemicals technology parks are to be established in the coming years.
Such declarations of intent do not mean that global market leaders such as BASF, Evonik, Lonza or DSM need to be acutely concerned with their huge R&D expenditures. But China's planned economy has repeatedly proven over the past decades that its industrial policy and its pronouncements are anything but a paper tiger. The global fine chemicals industry will therefore probably have to gradually adjust to growing competition from China.
With stronger tailwind from Beijing and support from provincial governments, life will become easier for Chinese producers such as Transfar Zhilian, Zhejiang Hisoar Pharm, Zhejiang Runtu, Shanghai Anoky Group or Liaoning Kelong Fine Chemical, not least because of easier access to capital.