Sinopec-BASF project approved

The Chinese government approved a US$1.4 billion expansion project of a Sinopec-BASF joint venture in Nanjing on 1 July. With an initial US$2.9 billion investment by the two players, the BASF-Yangzi Petrochemical Company (YPC) project was originally put into commercial operation in 2005. Its products include acrylic acid, intermediates and aromatics. The BASF-YPC expansion will increase the existing steam cracker, build 10 new chemical plants, and enhance three existing plants. Meanwhile, Yangzi-BASF Styrenics Co., Ltd. (YBS), another joint venture in Nanjing between the two partners, is being merged into YPC to further increase synergies in Nanjing operations.

Earlier this year, BASF chairman Jürgen Hambrecht said that the BASF Nanjing project would be delayed due to the economic situation. In early July the company also announced plans to cut 3700 jobs worldwide by 2013 as a result of its acquisition of Swiss firm Ciba.

Separately, Sinopec announced that it had received the approval from the Chinese National Development and Reform Commission (NDRC) on 7 July to jointly construct a US$3 billion petrochemical complex in Tianjin with Saudi Basic Industries Corporation (SABIC).

Acquisition for new energy giant

Hong Kong-listed GCL-Poly Energy Holdings announced on 23 June that it will spend HK$26.35 billion (US$3.4 billion) to buy 100 per cent of the shares of Jiangsu Zhongneng Polysilicon Technology. The deal is one of the largest acquisitions between new energy developers in China. GCL Solar, a subsidiary of GCL-Poly Energy Holdings, is already the biggest stakeholder of Zhongneng Polysilicon, which is located in Xuzhou, Jiangsu province, and is one of the world's biggest suppliers of polysilicon in the solar industry. After the acquisition, GCL Solar's annual polysilicon production capacity is expected to reach 18,000 tonnes by the end of 2009. With further technical upgrades, it will further expand to 21,000 tonnes by the end of 2010.

The acquisition took place amidst a new investment boom for new energy development in a time of economic crisis in China. Separately, Jiangsu -based polysilicon maker Suntech said on 3 July that it will invest 8 billion yuan (US$1.18 billion) in Sichuan Province's Penzhihua city to build a 500 megawatt solar energy generation plant. 

Australian mining firm staff detained 

Chinese police detained four employees of the Anglo-Australian mining group Rio Tinto on 1 July on suspicion of stealing State secrets. Stern Hu, Rio's head of marketing and sales in China, was detained together with three Chinese Rio employees. They were alleged to have been spying on secret Chinese information in the negotiations on iron ore pricing between Chinese steelmakers and major international suppliers. Hu is the head of Rio Tinto's negotiation team.

The Chinese side tried to further cut ore prices after the suppliers agreed to slash their price by 33 per cent with Japanese and South Korean buyers in May. Since then, the talks have been deadlocked. A senior official at the State-owned Capital Steel was also held by police, accused of revealing negotiation secrets from the Chinese side to Hu. 

The detention of the employees followed Rio's recent decision to abandon a plan to sell a US$19.5billion stake to Chinalco, the Chinese State-owned mining company, but both Chinese and Australian governments denied a link between the two cases. 

Sinopec acquires Swiss oil firm

In the largest overseas acquisition for a Chinese oil firm, Sinopec announced on 24 June that it will buy 100 per cent of the Swiss oil firm Addax at a price of US$7.24 billion. Sinopec is currently waiting for approval of the deal from the Chinese government. 

UKand Canada-listed Addax's production accounts for 78 per cent of Sinopec's existing overseas production capacity, which relies heavily on imported oil for its strong refinery wing. Addax's main oil reserves are located in Western Africa, particularly Nigeria, which is a key oil supply zone for Sinopec. Meanwhile, on 8 July, Sinopec became the first Chinese firm to enter the top 10 of the Fortune 500, slipping in at ninth place and bringing the total number of Chinese companies in the group to a record high of 45.  

Separately, Sinopec's former chairman Chen Tonghai was sentenced a two-year stay of execution by Beijing Second Intermediary Court on 15 July for embezzling 195 million yuan (US$28.7 million) during his tenure at the company. Chen has now returned all the money he embezzled. 

Energy giant restructures State-owned pharma

The State-owned Jizhong Energy Group, a mining giant which belongs to Hebei provincial government, was commissioned by the provincial government in late June to acquire and restructure a leading Chinese pharmaceutical firm, North China Pharmaceutical Group. Also belonging to the provincial government, the Shijiazhuang, Hebei Province-based North China Pharmaceutical is the largest producer of active pharmaceutical ingredients for antibiotics and vitamins in China.

Despite a long tradition stretching back to 50 years, North China Pharma has been struggling due to a lack of profitable products and cash flow. Earlier this year, the Hebei provincial government forced a relocation of factories located in urban areas, including 11 plants affiliated with North China Pharma, to improve the urban environment. The company could not bear the relocation costs of 4.9 billion yuan (US$720.6 million) and sank into difficulties. Analysts say the restructuring could solve North China Pharma's capital shortage but it is unlikely that the State-owned energy giant can improve the pharma's technological ability. 

Provinces improve energy efficiency 

According to official figures released by the National Bureau of Statistics on 1 July, last year 80 per cent of the 32 Chinese provinces and municipalities reached the energy-saving goal of reducing energy consumption for per capita of GDP (gross domestic product) by 4 per cent annually. Nationwide, the figure is 4.59 per cent, though it is largely a result of slowing economic progress which has caused negative growth of power generation since the last quarter of 2008.

China vowed in its 11th Five-year Plan (2006-2010) that energy consumption per unit of GDP will be reduced by 20 per cent over the period, meaning an average 4 per cent cut annually. But in 2006 and 2007, China's energy consumption for per unit of GDP only declined by 1.79 and 3.66 per cent respectively due to the fast expansion of more energy-intensive heavy industries. 

Among the Chinese regions, coal-rich Shanxi Province and Beijing Municipality have recorded the biggest cut in energy use, both by more than 7 per cent.