Focal Investment Fields in the Petrochemical Industry Determined
                           By Zhong Weike
The petrochemical industry in China is faced with challenges  from  both  the
unbalanced supply  and  demand  and  the  international  competition.   Many
problems  also  exist  in  the  petrochemical  industry  itself.   They  are
manifested in the following aspects.
(1) unbalanced supply and demand and deficit in foreign trade volume
The output of ethylene in China has increased rapidly in the past  10  years
or so, but the per-capita amount is much lower than the world average of  13
kg. It is also true with some synthetic materials. The increasing demand has
led to a large shortage of resources. To meet the domestic demand  and  fill
up the gap, China has to spend a great  deal  of  foreign  exchange  in  the
import of petrochemical products. There is a  considerable  deficit  in  the
foreign trade volume of petrochemical products.
  Besides the quantity, there is also a  big  gap  in  variety  and  quality.
Synthetic resins only have incomplete bands and low grades  or  no  domestic
production, and great quantities have to be imported from abroad each  year.
For example, synthetic fibers  such  as  biaxial  stretching  polypropylene,
washing machine cylinder material,   special  automobile  materials,   cable
materials and agricultural mulch materials have  such  problems.   Polyester
produced in China only has few varieties and poor quality, and  fine  denier
yarn and super fine denier filament are in  short  supply.   The  production
capacity and product variety of polyamide and acrylic fibers  can  not  meet
the domestic demand either. In the field of  rubber,   China  still  has  no
production of butyl rubber, EPDM, solution SBR and soft NBN. There is  batch
production of SBS, but great quantities of SBS for rubber shoes  still  have
to be imported due to quality and variety problems with the domestic products.
(2) low localized rate of imported petrochemical equipment
  Nearly a hundred petrochemical units have been imported since the late  50.
A considerable foundation and rich experience  have  been  achieved  in  the
petrochemical industry. However, due to problems in technology and  capital,
the petrochemical industry in China is still based on imported equipment.
  According to the purchase volume of petrochemical  equipment,   the  market
share of domestic equipment was only 10% before 1985 and around  20%  today.
The continuous low localized rate in petrochemical units will bring  heavier
pressure of foreign exchange and technology on the future development of the
petrochemical industry.
(3) poor international market competitiveness of petrochemical products
  The petrochemical industry in China is suffering and will still suffer huge
pressures from the international competition.  Major  problems  include  the
following: The domestic crude oil resources are insufficient; The labor cost
is high; The domestic prices of crude oil and  chemical  raw  materials  are
  lower  than  the  international  prices,   but  the  domestic   prices   of
petrochemical products  are  higher  than  the  international  prices;   The
petrochemical units have a small size, low technical  level  and  inadequate
oil processing.
(4) heavy reliance on the international market in oil processing
  The total amount of crude oil resources in China is rather big, but the per
-capita amount is not enough. The utilization of crude oil is not rational.
  China started processing of imported crude oil as late as 1988. The SINOPEC
system processed nearly 2 000 tons of imported crude oil by 1996,   and  the
amount is expected to increase further in future. The concept of  processing
imported crude oil has the following drawbacks: The price of imported  crude
oil is high; The domestic crude oil processing  enterprises  still  can  not
adapt themselves to the price fluctuations of crude oil in the international
market; The quality of domestic oil products is low.   Varieties  with  high
performance and high value are in short supply. The consumption of crude oil
is high. What is more, the equipment and technical  level  in  the  existing
units can hardly process crude oil with high sulfur content, acid value  and
impurities content. A great gap exists in the  crude  oil  processing  level
between China and advanced foreign countries.
  Based on  the  above  analysis,   the  focal  investment  fields  in  China
petrochemical industry from 1998 to 2000 will be as follows:
(1) The development priority will be on synthetic resins to  increase  their
proportion in synthetic materials from the present 62% to 66%  in  2000  and
70% in 2005. Efforts will be made to increase the proportion of  LDPE,   PS,
ABS and engineering plastics and make a moderate expansion of PVC.  Besides,
the output of general-purpose resin with  small  production  scale  such  as
polyurethane, unsaturated polyester, acrylic resins and amino resins  should
also have a considerable increase. The production of basic synthetic  resins
should be strengthened to ensure the development of  new  product  varieties
for the domestic market.
(2) Special attention will  be  paid  to  the  development  of  much- needed
varieties of synthetic fibers, synthetic rubbers and  organic  chemical  raw
materials. The structure of polyamide fiber  and  acrylic  fiber  should  be
readjusted and the proportion  of  polyester  fiber,   polyamide  fiber  and
acrylic fiber will be 69.2 : 12.3 : 18.5. The  output