Multinational Petrochemical Giants Optimistic About The Chinese Market

Strong performance growth in China with strong support from policy measures

The world economy, which has been severely hit by the new crown pneumonia epidemic, is coming out of the trough, and it is also facing many constraints. However, in 2021, China's economic response sheet highlights the achievements of high-quality development, with a GDP growth of 8.1% over the previous year, and a contribution rate of about 25% to world economic growth. Through trade, investment and other channels, China has brought the concept and practice of high-quality development to the rest of the world, allowing countries to share the dividends of high-quality development. This also makes the multinational petrochemical giant more confident in the Chinese market. The open, inclusive and diversified Chinese market has further enhanced its attractiveness to foreign investment.

MNCs' strong growth in China

The multinational petrochemical giants have recently announced their 2021 financial reports one after another. Compared with 2020, multinational petrochemical giants have swept away the haze of the epidemic and their performance has recovered rapidly. A combination of factors has contributed to the strong performance of multinational companies in China, increasing their confidence in achieving sustainable revenue growth.

Lei Huanli, global senior vice president of polymer giant Covestro and president of China, said that in 2021, Covestro's sales in China will account for 22%, a year-on-year increase of 57.5%, making it the company's largest single market in the world. By the end of 2021, Covestro's total investment in China has exceeded 3.8 billion euros (equivalent to RMB 26.1 billion), and the cumulative investment of Covestro's Shanghai integrated base has reached 3.6 billion euros (equivalent to RMB 24.75 billion).

Exxon Mobil's operating income in 2021 was US$285.64 billion, a year-on-year increase of 57.38%; net profit was US$23.040 billion, a year-on-year increase of 202.67%. The company said the strong performance was inseparable from China's open market. On November 8, 2021, ExxonMobil made a final investment decision to invest billions of dollars to fully advance the chemical complex project in the Daya Bay Petrochemical Industrial Zone, Huizhou, Guangdong.

BASF’s 2021 financial results showed sales of EUR 78.6 billion, a year-on-year increase of 33%, and EBIT before special items of EUR 7.8 billion, a year-on-year increase of 118%. Among them, sales in China will reach 12 billion euros in 2021, an increase of 7.7%, and the Chinese market has increasingly become the growth driver of global chemical production.

Bayer announced its 2021 annual financial report, with group sales of 44.081 billion euros, a year-on-year increase of 8.9%, and net income of 1 billion euros. For the full year of 2021, the sales of the entire Bayer Group in the Chinese market reached 3.856 billion euros, compared with 3.483 billion euros in 2020, a year-on-year increase of 10.7%.

Good performance is inseparable from Chinese policy support

The good performance of multinational companies comes from China's opening of doors. Many multinational companies practice the concept of "in China, for China, and with China" with practical actions.

After the outbreak of the epidemic, major developed economies represented by the United States quickly introduced ultra-loose policies, especially the expansionary fiscal policy, which quickly amplified demand in a short period of time, trying to "demand-driven recovery". However, the trend of events is not consistent with the playbook of policymakers, and the production capacity of enterprises cannot keep up with the surge in demand. On the contrary, China has never stopped opening up to the outside world on a wider, wider and deeper level. Substantial opening-up measures have given foreign businessmen confidence and expectations, and also brought more tangible benefits to foreign-funded enterprises.

"China's 14th Five-Year Plan and policy measures have become a catalyst for BASF's deployment in China. BASF is ready and will continue to increase its presence in the Chinese market, adhere to sustainable development, and contribute to the goal of high-quality development in China." BASF Greater China District Chairman and President Dr. Lou Jianfeng said.

The good performance of multinational enterprises also comes from China's safe, stable and reliable development environment. China is striving to create a market-oriented, legalized, and international business environment, which provides a strong guarantee for companies from all over the world to invest and start businesses in China, and continues to contribute positive energy to the world economy, thus becoming a "fertile soil" for multinational companies to grow against the trend. 

Multinational companies continue to be optimistic about the Chinese market

The good performance of multinational companies in the Chinese market is particularly valuable, which makes multinational companies increasingly confident in their long-term development in China.

The Guangdong Provincial Development and Reform Commission recently announced the "Guangdong Provincial Key Construction Project Plan in 2022". A total of 1,570 provincial key projects will be arranged in 2022, with a total investment of 7.67 trillion yuan and an annual planned investment of 900 billion yuan. Among them, two overseas petrochemical giants continue to build projects with a total investment of about 127.9 billion yuan, namely ExxonMobil Huizhou ethylene project and BASF (Guangdong) integrated base.

"Our investment in key growth projects at the new Zhanjiang integrated site is critical to driving BASF's future growth," said Hans-Ulrich Engel, Chief Financial Officer of BASF. BASF's planned capital expenditure for 2022-2026 is EUR 25.6 billion, which is EUR 2.7 billion higher than in the previous planning cycle 2021-2025.

"China's demand for high-performance polymers will continue to grow, and we are well-positioned to help meet the needs of this growing global market," said Jialin Mo, global vice president and president of Chemicals, ExxonMobil. "We are committed to building a competitive growth platform in Daya Bay, and we look forward to the progress of this exciting project."

On March 8, Sinopec and Saudi Aramco signed a memorandum of understanding. The scope of cooperation includes Sinopec's existing refining and chemical projects and future expansion projects. The two parties will give full play to their advantages and further strengthen long-term cooperative relations. At the same time, the two parties will jointly optimize the operation of the joint venture Fujian United Petrochemical Co., Ltd.

Mohammad Qahtani, senior vice president of Saudi Aramco's downstream business, said that the signing of the memorandum is a new chapter in the long-term cooperative relationship between Saudi Aramco and Sinopec. This will further facilitate the integration and expansion of Saudi Aramco's downstream business in Asia to meet its growing energy needs by supplying low-carbon-intensity crude oil to China. On March 10, Fujian Zhongsha Petrochemical Co., Ltd., a joint venture between global petrochemical giant Saudi Basic Industries Corporation and Fujian Nenghua Group, was officially registered and established. The project plans to invest about 40 billion yuan. "Take the express train of China's economic development and share the vast opportunities of the Chinese market" has gradually become the consensus of multinational petrochemical giants.