China Market Insider China is Upgrading: Plans for Domestic Specialty Chemicals

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Specialty chemicals are currently at the top of the Chinese Government's plans. Due to the importance of new materials for several key industries - from e-mobility to renewable energies and semiconductors - this branch of the chemical industry is set to receive strong support over the next five years.

Beijing/China – Specific development plans for specialty chemicals have been layout out in several Chinese provinces. This has made it possible for the first time to obtain an overview of where and by whom performance materials are to be developed and produced in China in the future. It becomes clear which materials China attaches particular importance to and which local projects can expect special support.

The detailed plans for provinces and locations such as Guangdong, Fujian, or Shanghai add up to nothing less than an attempt to launch an entire industry. If they succeed,this will mark the birth of Chinese specialty chemicals as a leading player on the world market.

In a recent analysis, the Chinese chemical newspaper Zhongguo Huagong Bao makes it clear that this is no easy undertaking by describing the current state of specialty chemicals in China in an unvarnished manner. It shows that China still lags far behind other nations.

Specialty chemicals currently account for only 8.7 percent of Chinese chemical production. Specialty fibers produced in the People's Republic have a global market share of less than ten percent. There are also more than 130 new materials that "cannot yet be produced independently of other countries," the Chemical Newspaper quotes a spokesman for the China Petroleum and Chemical Industry Association.

The ambitious plan: Within the next five years, a self-sufficiency rate of 75 percent with the most important specialty chemical products is to be achieved, and the share of specialty chemicals in the total production of the chemical industry in China will exceed by ten percent. The aim is to build a new materials industry commensurate with China's status as a major petrochemical nation, writes the Chemical Newspaper.

Specialization at the provincial level

Guangdong Province is, therefore, to focus from now on, among other things, on engineering plastics, chemicals for the electronics industry, functional membrane materials and high-performance fibers.

Shanghai is now expected to produce more high-performance polyolefins, engineering plastics, specialty synthetic rubber, specialty adhesives and other advanced polymers, as well as materials such as specialty surfactants, electronic chemicals and pharmaceutical intermediates. Industrial parks and individual companies in Shanghai are also expected to take the lead in this national race to catch up in high-temperature superconductors, graphene and materials for 3D printing.

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Individual materials mentioned so far are also to be increasingly developed and produced in the coastal province of Fujian, in addition to ultra-high molecular weight polyethylene, aramid fibers and new ceramic-based composites, to name just a few examples.

Among the product groups highlighted in the provincial plans are ‘functional materials’ for the processing of rare earth, and new materials for lithium batteries such as anodes, cathodes and high-grade electrolytes. The importance of graphene materials and the ‘measurement and characterization of structures in the micro-nano range’ are also emphasized.

R&D according to the plan

The above examples make clear how detailed central planners in Beijing and provincial cadres have been about the specialty chemicals that could trigger bottlenecks in several key industries of the future if, for example, there were further trade boycotts from Washington.

Time and again, local industrial planners are urged to leverage existing local ‘assets’ in new materials. For example, the existing potential of companies such as Xiamen Tungsten New Energy, Qingmei, Shanshan should be fully exploited when it comes to new materials for lithium batteries. Or in the field of graphene, for example, the Xiamen Torch High-Tech Zone. Sites in Quanzhou Jinjiang or Sanming Yongan will be developed into industrial clusters.

Research & development in the field of specialty chemicals is not merely to be strengthened in general, but is currently being distributed among very specific projects at the provincial level. Shanghai, for example, is committed to expanding the Shanghai International Chemical New Material Innovation Center and supporting it to the best of its ability. In Shandong Province, a new R&D center of Wanhua Chemical Group will take care of a specific group of new materials. Certain places such as Weihai, Jining, Dezhou or Taian will be developed into leading locations for the industrialization of carbon fibers.

Insight into China's specialty chemicals future

The Chinese provinces' development plans read like an inventory of the materials without which modern production in biotechnology, semiconductors, aerospace or renewable energy would be impossible. Taken together, they provide a fascinating glimpse into the future of specialty chemicals in China.

After all, if China's central planners have proven one thing in the past, is that they will not be deterred by individual setbacks, overcapacity here or there, or even corruption scandals. So, in all likelihood, they will also implement these plans step by step.

* 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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