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By: Terence P. Stewart, Elizabeth J. Drake and Jennifer M. Smith
Stewart and Stewart
Washington, DC

In a new report released today, Stewart and Stewart provides a detailed look at the vast range of Chinese government policies supporting its chemical and plastics industries.  The report details policies at the national and sub-national level that are designed to stimulate growth in China’s chemical, petrochemical, and plastics industries, strengthen integration among the industries, reduce import dependence, and move China’s producers up the value chain.  These policies have contributed to steady growth in China’s production and trade, enhancing the Chinese competitive position in this critical sector.

Considered one of China’s “heavyweight” industries, China’s chemical and plastics industry is sprawling.  As of 2012, it consisted of 23,694 raw chemicals and chemical products manufacturers, 16,356 plastics and rubber manufacturers, 1,873 chemical fibers manufacturers, 6,387 pharmaceutical manufacturers, and 2,036 petroleum processing, coking, and nuclear fuel processing companies.  In 2011, these manufacturers produced 15.5 trillion yuan in goods ($2.4 trillion), making up nearly a fifth of China’s entire industrial output.  Total profit for the combined industries was estimated at 1.3 trillion yuan ($195 billion) in 2011.

The economic importance of China’s chemical and plastics industry is reflected in Chinese government policies designed to support and develop the industry.  These include policies to reduce China’s dependence on imports of chemical and plastic products, to encourage mergers and acquisitions within the domestic industry, to support continued state involvement in major Chinese producers, and to upgrade the industry’s ability to innovate and produce higher value-added products.  To reach these goals, the government of China provides an array of subsidies to Chinese producers, including grants, low-cost loans, preferential tax treatment, and the provision of land and other key inputs at below-market prices.  The Stewart and Stewart report documents the receipt of such subsidies by some of China’s largest chemical and plastics producers, based on their own annual reports.

These support measures are slated to increase under China’s most recent policies for the industry.  The Stewart and Stewart report reviews a broad range of central and provincial policies to support China’s chemical and plastics industries, including:

· Policies for the petrochemical and plastics industries promulgated as part of China’s $586 billion stimulus programs in 2009;

· China’s 12th Five-Year Plan for its economy in the period from 2011 to 2015, including central and provincial policies focused specifically on the petrochemical and chemical industry;

· Inclusion of certain chemical and plastics products in China’s list of “Strategic and Emerging Industries,” in which China plans to invest up to $1.7 trillion from 2011 to 2015;

· Specific support plans for subsectors such as olefins, herbicides and pesticides, and chemical fibers; and

· Identification of certain chemical and plastics products in government catalogues of products that qualify for preferential treatment from government agencies and state-owned banks.

In certain targeted product areas such as high-performance membrane materials, engineering plastics, and high-performance fiber and composite materials, the explicit goal of China’s support policies is to permit China to become the world’s largest producer of the products by 2030.

China’s chemical and plastics industry has already seen rapid growth since China joined the World Trade Organization (“WTO”) in 2001.  Chinese government statistics show that production has more than tripled since 2001, and that it has more than quadrupled for plastics in primary forms and chemical fibers.

China is also a very important importer and exporter of chemical and plastics products.  In 2013, China was the third largest importer and fourth largest exporter of inorganic chemicals, the world’s largest importer and exporter of organic chemicals, and the largest importer and second largest exporter of plastics.  Overall, China accounted for 13% of the world’s imports of these products and 11% of global exports.  In 2013, China’s overall exports of chemicals and plastics were over eight times the value of China’s 2001 exports, and its overall imports of chemicals and plastics in 2013 reached nearly six times their 2001 value.  Despite more rapid growth in exports than imports, China continues to be a net importer of both organic chemicals and plastics, though it maintains a trade surplus in inorganic chemicals.

As detailed in the Stewart and Stewart report, rising trade has sometimes resulted in trade frictions.  While the chemicals sector has traditionally been a frequent subject of trade remedy actions around the world, China’s trade remedy initiations since it joined the WTO have focused disproportionately on the sector.  Indeed, since 2001, over half of all trade remedy cases initiated by China have been on chemical or plastic products.  Chinese exports of these products have also been subject to trade remedy actions in other countries.  The Stewart and Stewart report reviews nine subsidy investigations initiated by the United States on such imports from China since 2006.

China is a vitally important producer and consumer of chemical and plastics products, and its government is actively engaged in supporting and nurturing this key industry.  The rapid growth of China’s chemical and plastics industries presents enormous opportunities and potential challenges for other producers around the world.  The large scale and rapid growth of China’s industry provides foreign producers with export and investment opportunities, particularly in areas where China’s own domestic producers may continue to lack technology or know-how.  The growth in China’s production and trade may also pose challenges to foreign producers who compete with Chinese exports in their own home markets or third-country markets.   This report aims to detail Chinese government policies in this important sector, particularly as they affect trade between China and the U.S. as well as others.  A greater understanding of the government of China’s goals and policies for its industry will help producers in other countries better understand the opportunities and risks they face in this large and rapidly-changing market.

For more information about Stewart and Stewart, please contact Elizabeth J. Drake at or visit the International Society of Primerus Law Firms.