In the context of the expansion of bank credit scale from 2009-2013, funds were easily available. At the same time, chemical production technologies were widely used, as well as the relatively lenient approval of chemical projects such as environmental assessment in various regions of China, and the barriers to entry in the chemical industry were relatively low.
The number of chemical production enterprises increased significantly during 2011-2015, and the rapid growth of fixed asset investment in the industry led to rapid expansion of chemical production capacity. According to the National Bureau of Statistics of China, the growth rate of fixed investment in chemical raw materials and chemicals in China from 2012-2015 was 31%, 17%, 11% and 3%, respectively. At the end of 2015, the number of chemical raw materials and chemicals manufacturing enterprises in China was nearly 25,000, an increase of 16.5% (+2,342) from the beginning of 2011. In terms of specific chemicals, the average annual compound growth rate of China's MDI, propylene oxide, adipic acid, spandex, PTA, ethylene glycol, and methanol production capacity during 2011-2016 exceeded 10%, and the average annual compound growth rate of organosilicon, titanium dioxide, polyester filament, viscose staple fiber, and acetic acid production capacity exceeded 5%.
Data source: Wind, Bloomberg, CICC, etc.
The number of new entrants in the chemical industry during 2011-2015 is high, and the number of chemical production enterprises continues to increase. The chemical production capacity also shows a "dispersed" expansion, and the competitive pattern of the industry deteriorates. The rapid growth of chemical production capacity led to the oversupply of some chemicals.
Due to the disorderly expansion of chemical industry capacity, the chemical price index showed a downward trend during 2011-2015, and the profit margin of chemical industry gradually declined to a low level.
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