China’s fast-growing chemical industry has been the largest in the world by revenue since 2011, and its growth rate continues to outpace by far other major chemical-producing regions. But this colossal size should not be seen as a sign of stability. On the contrary, China’s chemical industry is in the midst of a profound, rapid transition.
China’s growth in chemicals over the past two decades has been characterized by rapid investment and intense competition and fragmentation across large numbers of segments. This has particularly been the case where production technology has been widely available and where access to raw materials and financing has been easy to obtain. This combination has led to rampant overcapacity in many sectors.
But the market and the industry are now moving into a new phase of development. There’s a shift toward specialty-chemical growth, reflecting consumer-demand trends and the rising sophistication of China’s industrial output, while consolidation has started to take a grip in certain sectors. These trends are all helping the value-pool growth prospects for parts of the industry. In the meantime, money for investment is harder to come by, and the government is imposing new, stricter environmental regulations on the industry. To succeed in this next stage of China’s chemical-market development, players will need to embrace a new set of strategies.
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By Sheng Hong, Yifan Jie, Xiaosong Li, and Nathan Liu
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