Industry to get recession protection

Hepeng Jia/Beijing, China 

China’s chemical industry is expected to benefit from a package of government policies to help cope with the economic slowdown. 

Chinese premier Wen Jiabao has announced that the government plans to help 10 industries, including steel, ship-building, and petrochemicals. ’The plans are intended both to address the impact of the economic crisis and to promote long-term development,’ he said. 

Zhao Jungui, vice-secretary general of the China Petroleum and Chemical Industry Association (CPCIA), confirmed that the government is drafting plans for the chemical industry. ’We are helping the government to collect industry views. The plan is far from finalised, but should be quite similar to the tax reduction, export tariff return, and other financial support already given to other industries,’ he told Chemistry World  . 

On 14 January the State Council, China’s cabinet, passed plans to aid the automotive and steel industries. The plan for the steel industry includes favourable tax rates, support for industrial reshuffles, and policies to encourage the use of more domestic steel. Under the automotive industry plan, consumer tax on small cars is halved to 5 per cent. 10 billion yuan (US$1.5 billion) has been pledged to support companies’ technical upgrades in the next three years, and 5 billion yuan to encourage farmers to buy new trucks in 2009. 

According to CPCIA, by November 2008 China’s petrochemical industry’s profits had declined by 7 per cent year-on-year to 466.7 billion yuan ($68.6 billion). The chemical industry suffered during last year’s Olympic Games because of transportation bans for most chemicals. The production of raw materials was initially boosted by a price hike but many customers - down-river chemical factories near Beijing or Shanghai - were hit by the bans that caused raw material prices to slump before the current financial crisis began. 

Yin Xiaodong, a petrochemical industry analyst at Beijing-based CITIC Securities, considers that policies to boost industrial reshuffling might not work for the chemical industry because it is already dominated by major companies. And because the industry has a wide customer base, it is difficult to develop a single economic solution for the whole industry. ’Salvaging the chemical industry means salvaging the whole economy,’ Yin told Chemistry World.