Brief Analysis of Supply and Demand
                     in the Chemical Market
  - sustained slackness and small margin recovery in 1998;
  - balanced supply and demand and cautious optimism in 1999

               By Sun Aichang  (China Chem. Co.)
1. Analysis of the chemical market in 1998
The  chemical  market  in  China  has  experienced  overall
readjustment,   local  fluctuation    and    small  margin
recovery this year.
(1) The chemical industry has made a  smooth  growth  never
seen in these  years.   In  the  months  from  January  to
September this year, the total output  value  of  chemical
industry was 207.669 billion yuan, a rise of 3. 69%   over
the same period last year, 4. 31  percentage  points  less
than the planned target. Table 1 shows the detail.
(2) The production-marketing ratio of the chemical industry
has  maintained small  fluctuation  and  smooth  recovery.
Table 2 shows the detail.
(3) The prices of chemical products have been kept  on  the
low side this year. There is a sign for a price  rise  for
some products.   Table  3  shows  the detail.
Factors causing the overall pattern of the chemical  market
this  year  are many-sided. Major factors are as follows:
(1) slackness in total demand: The national  economy   has
made  a  stable growth this year. In  spite  of  the  fact
that  the  state  has  intensified  macro  regulation  and
the industrial added value from January to  September this
year was 8% higher than the same period last year,     new
demand  hot spots have not yet been formed because of  the
  lagging  effect  of  macro  regulation.   The  production
development in  related  sectors  has  slowed  down,   and
  especially  there  are  lots  of  natural  calamities  in
agriculture.  There is lack of driving force in the demand
of chemical  products,     especially  those  serving  the
needs in agriculture.
(2) restriction in economic environment: The  readjustment
of the  economic pattern and the reform of the  investment
  and  financing  system  in   the  recent    years    have
caused  serious  orderless   competition    in    chemical
production and circulation.     Quite    a    number    of
chemical  sectors  and enterprises have  conducted   blind
expansion  and  extensive  management, leading to  serious
capital precipitation, asset loss and triangular  arrears.
The global economic slackness and the grave impact of  the
financial crisis in Southeast Asia  have    also    caused
sustained  low  prices   of    chemical  products  in  the
international market.  The  production  and  marketing  of
  chemical  products  has   therefore   experienced   great
difficulties seldom seen for many years.
(3) impact of overseas resources: Against a background  of
demand  shortage in the chemical market,  great    amounts
of  chemical  products  have   been  imported  this  year.
Table 4  shows  the  detail.   Smuggling    of    chemical
products still ran rampant in the first half of  this  year.
   The  actual unfavorable balance    of    the    chemical
products  listed  in  Table  4  is therefore much  bigger.
No wonder there is a huge pressure  on  the    supply  and
demand in the chemical market.
2. Supply and demand projection in the chemical  market  in
1999
After an overall readjustment this year,   the  supply  and
demand  of  chemical  products  will    be  balanced  next
year and the whole chemical market  will  have  a    trend
of stable recovery.
The main factors are the following two:
(1) The further improvement  of  the   domestic    economic
environment  will promote the balanced supply  and  demand
in the chemical market.
(a) With further reform and more effective  macro regulation,
  the  macro economic environment in investment,   finance,
   foreign  trade,  customs control and communication  will
be more flexible. The efforts  in cracking down  smuggling
have produced a strong deterrent role.   The  preferential
policies adopted  by  the  state  to  encourage  commodity
export   has  enhanced  the  competitiveness  of  domestic
products in the international market  and their ability to
withstand risks in foreign trade.
(b) The restructuring of government agencies conducted this
year  will  speed  up  the  transformation  of  government
  functions.   After  the  founding    of    the      State
Administration  of  Petroleum  and  Chemical    Industries
and  the  strategic  readjustment  and    regrouping  &n