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6 White Paper on the Business Environment in China
This situation appears an entirely domestic one, and the half the fiscal revenue of its home municipality, the company
field is likely to remain a mostly “locals-only” game according was the recipient of a “virtually unprecedented offer of govern-
to one foreign petro-executive: “Nationalization is gaining pace ment money to a non-state firm” totaling some 1.5 billion yuan
in many sectors in China, I doubt China is heading for a liber- in order to resume operation.59
alized oil market any time soon.”52
Regardless of relative slowdown during 2008 and 2009
Indeed, “CNOOC aims to more than double its annual things began to look up in 2010, with recovery noted in down-
output to 2.6 million barrels per day by 2020 under a strategy stream sectors.60 A KPMG survey showed similar downstream
[Chairman Wang Yilin] dubs the company’s ‘New Leap For- growth as a result of an increased focus on domestic consump-
ward.’”53 tion.61 The report went on to identify four key issues it expects
to influence the chemical industry’s outlook in coming years:
Indeed, in December 2011, new restrictions were issued on
foreign participation in refining, with the minimum capacity 1. Chinese government’s goal to shift the current produc-
for crude oil distillation being raised to 200,000 barrels per day tion model towards a more balanced and resilient one, as
(up from 160,000 barrels per day), the minimum threshold for set out in the 12th Five-Year Plan;
investment in catalytic cracking capacity and hydrocracking ca-
pacity both being set to 1.5 million tonnes per year and that 2. Both new and old mega-trends which include increased
for continuous reforming capacity being set to 1 million tonnes internal demand in China, continuous urbanization,
per year.54 shifts in value chains and environmental awareness;
Interestingly, the one improvement for foreign enterprises 3. Enhanced economic and financial volatility in global
in that round of market access adjustments was the result of markets; and
“the government [encouraging] foreign investment in explora-
tion and development of unconventional oil resources includ- 4. Market dynamics which can narrow the gap between local
ing shale oil, oil sands and heavy oil, and unconventional gas Chinese manufacturers and multinational players.61
resources including shale gas and seabed gas hydrate through
joint ventures or cooperation deals with domestic companies.”54 In late 2012, chemical purveyor BASF not only completed a
$1.4 billion petrochemical joint-venture with China Petroleum
Nonetheless, in 2012 foreign enterprises were excluded from and Chemical Corporation (also known as Sinopec) in Nan-
the first shale gas tender that year, “despite a need for overseas jing62, but also “inaugurated” an unsubtly-named “innovation
technology to help exploit massive reserves of gas trapped with- campus” in Shanghai—the company’s first such facility in Asia
in shale rock formations in the world’s top energy user.”55 The Pacific, according to China Daily.63
Financial Times later reported that foreign-funded joint ven-
tures were permitted to bid in a second round later that year.56 In addition to KPMG’s positive outlook and foreign parties’
increased participation in the sector, here has also been an in-
While energy-related chemicals saw a decline in production crease in ‘NIMBY’, or “Not In My Backyard” protests by ordi-
and consumption as a result of the global economic slowdown, nary Chinese citizens against industrial projects; in several cas-
it appeared to be non-energy related chemicals that were hard- es, the source of locals’ ire has been a chemical facility planned
est hit, and in the face of strong historical growth and optimism to produce paraxylene (PX).
about future progress—it was noted in 2005 by the Royal Soci-
ety of Chemistry’s monthly journal that “demand for chemicals In late 2012 protests against one such planned expansion by
in China expected to double between 2002 and 2015.”57 China [Sinopec] in Ningbo led to “a spokesman for the Ningbo
government [saying] in a statement […] that there would be no
While the May 12, 2008 earthquake in Sichuan caused mas- further work done on the massive project […] pending further
sive disruption in transportation links as well as manufacturing ‘scientific debate.’”64 Sinopec is a publicly-traded subsidiary of the
operations (although the concentration of chemical manufac- state-owned China Petroleum Corporation.
turers in affected areas was reportedly not as high as in oth-
er regions)58, a larger concern for the sector turned out to be Although the facility’s expansion would appear to have been
downstream users of chemical products—while the brunt of the halted—at least temporarily—by the local citizenry’s discon-
initial effects of the global economic slowdown in China was tent, Reuters reported that the $8.8 billion project will likely
borne primarily by exporters, many providers of raw materials proceed “once the public furor dies down”, and that public con-
faced significant difficulties as production slowed and custom- cern might simply lead to the project being renamed in order to
ers stopped ordering. Often singled out, for example, were pro- “downplay or disguise [it].”64
ducers of polyester.59
Similar demonstrations in Qidong (near Shanghai), Dalian,
Exemplary of this difficulty was the case of Zhejiang Hual- Xiamen in 2012, 2011 and 2007, respectively, also delayed or
ian Sunshine Petro-Chemical, which was deemed, much as deflected industrial projects due to concerns over hazardous
banks in the U.S. were, ‘too big to fail’. Accounting for nearly chemicals.64
136 Seemingly in response to these surprisingly effective cam-
This situation appears an entirely domestic one, and the half the fiscal revenue of its home municipality, the company
field is likely to remain a mostly “locals-only” game according was the recipient of a “virtually unprecedented offer of govern-
to one foreign petro-executive: “Nationalization is gaining pace ment money to a non-state firm” totaling some 1.5 billion yuan
in many sectors in China, I doubt China is heading for a liber- in order to resume operation.59
alized oil market any time soon.”52
Regardless of relative slowdown during 2008 and 2009
Indeed, “CNOOC aims to more than double its annual things began to look up in 2010, with recovery noted in down-
output to 2.6 million barrels per day by 2020 under a strategy stream sectors.60 A KPMG survey showed similar downstream
[Chairman Wang Yilin] dubs the company’s ‘New Leap For- growth as a result of an increased focus on domestic consump-
ward.’”53 tion.61 The report went on to identify four key issues it expects
to influence the chemical industry’s outlook in coming years:
Indeed, in December 2011, new restrictions were issued on
foreign participation in refining, with the minimum capacity 1. Chinese government’s goal to shift the current produc-
for crude oil distillation being raised to 200,000 barrels per day tion model towards a more balanced and resilient one, as
(up from 160,000 barrels per day), the minimum threshold for set out in the 12th Five-Year Plan;
investment in catalytic cracking capacity and hydrocracking ca-
pacity both being set to 1.5 million tonnes per year and that 2. Both new and old mega-trends which include increased
for continuous reforming capacity being set to 1 million tonnes internal demand in China, continuous urbanization,
per year.54 shifts in value chains and environmental awareness;
Interestingly, the one improvement for foreign enterprises 3. Enhanced economic and financial volatility in global
in that round of market access adjustments was the result of markets; and
“the government [encouraging] foreign investment in explora-
tion and development of unconventional oil resources includ- 4. Market dynamics which can narrow the gap between local
ing shale oil, oil sands and heavy oil, and unconventional gas Chinese manufacturers and multinational players.61
resources including shale gas and seabed gas hydrate through
joint ventures or cooperation deals with domestic companies.”54 In late 2012, chemical purveyor BASF not only completed a
$1.4 billion petrochemical joint-venture with China Petroleum
Nonetheless, in 2012 foreign enterprises were excluded from and Chemical Corporation (also known as Sinopec) in Nan-
the first shale gas tender that year, “despite a need for overseas jing62, but also “inaugurated” an unsubtly-named “innovation
technology to help exploit massive reserves of gas trapped with- campus” in Shanghai—the company’s first such facility in Asia
in shale rock formations in the world’s top energy user.”55 The Pacific, according to China Daily.63
Financial Times later reported that foreign-funded joint ven-
tures were permitted to bid in a second round later that year.56 In addition to KPMG’s positive outlook and foreign parties’
increased participation in the sector, here has also been an in-
While energy-related chemicals saw a decline in production crease in ‘NIMBY’, or “Not In My Backyard” protests by ordi-
and consumption as a result of the global economic slowdown, nary Chinese citizens against industrial projects; in several cas-
it appeared to be non-energy related chemicals that were hard- es, the source of locals’ ire has been a chemical facility planned
est hit, and in the face of strong historical growth and optimism to produce paraxylene (PX).
about future progress—it was noted in 2005 by the Royal Soci-
ety of Chemistry’s monthly journal that “demand for chemicals In late 2012 protests against one such planned expansion by
in China expected to double between 2002 and 2015.”57 China [Sinopec] in Ningbo led to “a spokesman for the Ningbo
government [saying] in a statement […] that there would be no
While the May 12, 2008 earthquake in Sichuan caused mas- further work done on the massive project […] pending further
sive disruption in transportation links as well as manufacturing ‘scientific debate.’”64 Sinopec is a publicly-traded subsidiary of the
operations (although the concentration of chemical manufac- state-owned China Petroleum Corporation.
turers in affected areas was reportedly not as high as in oth-
er regions)58, a larger concern for the sector turned out to be Although the facility’s expansion would appear to have been
downstream users of chemical products—while the brunt of the halted—at least temporarily—by the local citizenry’s discon-
initial effects of the global economic slowdown in China was tent, Reuters reported that the $8.8 billion project will likely
borne primarily by exporters, many providers of raw materials proceed “once the public furor dies down”, and that public con-
faced significant difficulties as production slowed and custom- cern might simply lead to the project being renamed in order to
ers stopped ordering. Often singled out, for example, were pro- “downplay or disguise [it].”64
ducers of polyester.59
Similar demonstrations in Qidong (near Shanghai), Dalian,
Exemplary of this difficulty was the case of Zhejiang Hual- Xiamen in 2012, 2011 and 2007, respectively, also delayed or
ian Sunshine Petro-Chemical, which was deemed, much as deflected industrial projects due to concerns over hazardous
banks in the U.S. were, ‘too big to fail’. Accounting for nearly chemicals.64
136 Seemingly in response to these surprisingly effective cam-
