Financial help for China's chemical industry
24 February 2009
By Hepeng Jia/Beijing, China
China has approved a long-awaited plan to help the country's petrochemical industry survive the economic slump. The approval of the new strategy, which stresses industrial restructuring and will loosen investment controls, came on 19 February at a meeting of the State Council, China's cabinet. It is the ninth such industrial support package to be passed in the past month, and follows plans for industries from steel, auto and ship making to textiles.
Like other industries, the petrochemical sector in China has been severely hit by economic slump. According to the China Petroleum and Chemical Industry Association, consumption of finished oil products - a major indicator for the industry - dropped by 8.1 per cent and 8.6 per cent respectively in November and December 2008. The decline was accompanied by price cuts and dramatic rise in stockpiles of chemicals.
Petchem sales have slumped
© ASSOCIATED PRESS
Meanwhile, the plan also places restrictions on outdated production capacities, strictly curbs the piecemeal development of coal chemicals, and halts the approval on projects to expand charcoal and calcium carbide production.
Industry by industry approach
Recently approved stimulus schemes for other industries include tax reductions, export tariffs and extra financial support. For example, for the auto industry, the consumer tax rate on small cars was halved to 5 per cent, and 5 billion yuan (US$735.3 million) was allocated to encourage farmers to buy new trucks in 2009. The government also offered 10 billion yuan to support auto companies' technical upgrades over the next three years.
'The different policies are decided by particular situations of individual industries,' says Ye Yingmin, managing director of Beijing-based chemical consultant Chem1. 'For petrochemicals, the more profitable fine chemical products are mainly imported, so tax cuts can't be applied to favour domestic manufacturers.'
However, tens of billions of yuan are often invested in building new petrochemicals facilities, and they can significantly contribute to the national economy - so approving suspended or delayed key projects would be a major stimulus to the industry, Ye told Chemistry World.
According to China Securities News, just such action is being taken, with 40 key petrochemical projects - covering refineries, ethylene and paraxylene plants in Fujian, and other plants in Guangdong provinces, Shanghai and Tianjin cities and Xinjiang Autonomous Region - all approved.
On the other hand, unlike the new US President Obama's economic recovery scheme, which favours clean energy development, China's petrochemical industry renovation plan barely mentions new and clean energies.
'The petrochemical revival plan is still focused on improving economic outputs, and new and clean energies are too small in scales to play this role,' Ye concludes.
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