Data analysis: China's position in the global chemical industry

In the first half of the year, due to the dual impact of the new coronavirus epidemic and the plunge in oil prices, the global chemical industry suffered a severe impact. This article summarizes some key data that provide a quantitative reference for the importance of China's chemical industry to global and local participants. In addition, some differences can be drawn from the differences between these different data.

2% of the top 100 chemical companies

14% of global chemical exports

19% of global GDP

29% share of global chemical R&D

30% of the total added value of chemical industry

Accounted for 36% of the global sales of chemical products

45% of global wages and expenditures

50% of global chemical industry related work

60% of global direct chemical jobs

What do these data mean? Let's look at the details and compare some of the above parameters.

The chemical industry is very important to China. It not only provides a large number of jobs (8.7 million jobs provided directly, and 60 million jobs provided indirectly), accounting for half of the global chemical industry jobs. In addition, China accounts for 36% of global chemical product sales, more than North America and Europe combined. Comparing China's share of global chemical product sales with its share of global GDP, it can be found that the chemical industry is very important in China, because the former is almost double the latter (36% for the former and 19 for the latter %).

China is still paying attention to low-end chemicals to a certain extent. Its share of the global chemical industry's total added value (30%) is lower than its share of the global chemical market (36%). The government is well aware of this, and as evidenced by the focus on special chemical products in the “Thirteenth Five-Year Plan” (and possibly also the “14th Five-Year Plan”), it attempts to make positive changes through direct and indirect policies.

The productivity of the Chinese chemical industry is still below the global average. This is not only reflected in the high employment rate of China's chemical industry, but also in direct productivity estimates. For example, Oxford Economics estimates that the productivity (measured by total value added) of employees of chemical companies in the Asia-Pacific region accounts for only about 67% of the global average, while the productivity of European employees reaches 150%.

China's investment in chemical research and development is still slightly insufficient, which can be seen from its research and development expenditure (29% of global total expenditure) is lower than its share in the chemical market. This reflects that the share of specialty chemicals in China's chemical industry is still generally lower than that in Europe and the United States. R&D expenditures of commodity chemical companies often account for 2-3% of total sales, while R&D expenditures of some specialty chemical companies may reach 5% or more. However, China is catching up in this regard, not only by investing in domestic R&D projects, but also by acquiring overseas chemical knowledge—so, this expenditure is not necessarily declared as R&D expenditure, but is goodwill or other M&A-related project. A study by the scientific journal Nature found that China has become the largest producer of high-quality chemical scientific papers for the first time in 2019, while the United States ranks second. Therefore, the proportion of 29% may rise. In addition, with the dual support of government support and the company's desire to place research sites near important customers, China (especially Shanghai) continues to attract regional and even global R&D centers for multinational chemical companies.

China's chemical industry is still very fragmented. It is undeniable that the number of Chinese chemical companies on the ICIS list is very small (only Sinopec and Wanhua are among the top 100 companies), which reflects to a certain extent the mixed nature of Sinochem Group, China Chemical and PetroChina. However, this also shows that the industry is much more dispersed than other countries. Although we have seen a reduction in the number of chemical companies in China in the past few years, there are still many smaller and inefficient manufacturers, most of whom have no business outside of China.

China's chemical industry is relatively self-sufficient. China's share of global exports is much lower than its share of the global market. This shows that China's chemical industry has established a relatively complete chemical value chain from the production of chemical products to the use of final products, which is different from other companies (especially European) companies that rely heavily on the export of chemical products.

The global importance of China's chemical industry will further increase. This can be demonstrated by reports from companies such as Sabic, BASF and Clariant, and (perhaps more directly) the large chemical capital expenditures allocated to China in 2018. This proportion is as high as 45%, much higher than China's chemical market share. In addition, this proportion increased from 29% in 2008 (India is sometimes regarded as China’s competitor in the chemical industry, but its share of global wage costs has changed from 3% in 2008 to 2018 2%). The forecast of individual chemical product capacity development also points in the same direction. For example, according to individual GlobalData reports, from 2018 to 2023, China will account for 40% of the increase in propylene oxide capacity, 44% for acrylic acid, 57% for ABS, and 95% for ethyl acetate.

In summary, the above data clearly illustrates the importance and growth potential of China's chemical industry, but also illustrates the immature state of China's chemical industry.