China Market Insider China Establishes the World's Largest Chemical Company

Author / Editor: Henrik Bork* / Ahlam Rais

The mega-merger between Sinochem and Chemchina is now official, the move will create the largest chemical company in the world. The new chemical giant in China will have estimated sales of more than 144 billion dollars, thus, making it larger than BASF and Dow combined.

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PROCESS regularly reports on the Chinese chemical and pharmaceutical market with the format ‘China Market Insider’.
PROCESS regularly reports on the Chinese chemical and pharmaceutical market with the format ‘China Market Insider’.
(Source: ©sezerozger - stock.adobe.com)

Beijing/China – This merger had been the subject of intense speculation for several years. With a single, terse sentence, the State-owned Assets Supervision and Administration Commission (Sasac) has now announced on its website that it has approved the merger. The two state-owned enterprises Sinochem and Chemchina, both of which are already members of the ‘Fortune 550’ club, are merged into a newly created holding company with more than 200,000 employees.

In addition to the essential economies of scale, the merger is also about modernizing the Chinese chemical industry to make it more competitive internationally. This can be seen in the statements of the merger architects. "Science First" is the new group's slogan, said Ning Gaoning, who currently heads both the merging state-owned enterprises. "At present, original and high-tech products account for less than 30 per cent of sales for both companies’ combined, and this needs to be gradually increased," PROCESS (China) quoted the chairman as saying.

Both state-owned companies will now start a joint restructuring. The new holding company, whose name is not yet known, will be wholly owned by Sasac. The first details of the new chemical giant's strategic direction have also gradually emerged over the past two weeks.

The company will focus on the three key sectors of "life science, material science, and environmental science" after the merger is completed, states Sinochem CEO Yang Hua during a recent visit to one of his conglomerate's many subsidiaries. It's all about "transformation," and after the merger, the new company will want to benchmark itself only against the biggest and best chemical companies on earth, opined Ning Gaoning, chairman of the board.

The aim is to create a "comprehensive world-class chemical company led by life science and material science as well as supported by the basic chemical industry, guaranteed by environmental science and driven by science along with technology and sustainable development," added Gaoning.

Going forward, a unique eye will be placed on key materials in the fine chemicals and performance materials sectors to help reduce "bottlenecks," he said. Analysts see this as a thinly veiled reference to Washington's trade war, which wants to deny China access to high-value semiconductors and other key technologies. To develop its own chips, China also needs the necessary chemicals, which it currently has to import almost entirely, just like high-performance chips.

Environmental protection, energy savings, and emission reduction are also part of the chemical giant's new strategic direction. The company wants to support China's march towards climate neutrality actively.

* Henrik Bork, former China correspondent of the German Süddeutsche Zeitung and the Frankfurter Rundschau, is Managing Director at Asia Waypoint, a Beijing-based consulting agency. ‘China Market Insider’ is a joint project of the Vogel Communications Group, Würzburg, and Jigong Vogel Media Advertising in Beijing.

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