China Announces Ten Large Investment Plans   

In order to pull domestic demand and shoulder responsibility in solving economic recession globally, China's central government announced on November 10th ten large investment plans, valuing RMB4 000 billion in the coming 26 months by the end of 2010. Upon these plans, China will invest to accelerate constructing guaranty houses for low income people and infrastructures in countryside, make huge input in expanding railway, highway and airports and highlight the construction and recovery of ecological environment. Chemical makers will surely be benefited from these measures.  
    Unlike so catching the attention by the economic recessions happened in other regions worldwide, China's economic slowdown was reported as moderate slow, with strong potential to help world economy rebound. The world economy is in depression at the moment so it is hard to develop business, a lot of chemical industry getting slow, pointed out by Helen Chang from Orica.  
    China's September statistics tells a sharp downturn with many output reduction reported. The total sale for the petroleum and chemical industry was RMB4 900 billion in the first nine months of 2008, an increase of 31.5%. It is estimated that the total profit would be around RMB418.7 billion, a small growth of 3.4%. The refining sector may suffer a loss of approximately RMB120 billion.    
   In September only, more than 50% of 69 chemicals being tracked by CPCIA were witnessed with a production drop year over year. Key chemicals such as ethylene, sulfuric acid, caustic soda, chemical fertilizers and pesticides were reported with a negative growth. Many chemical makers reported heavy inventory. By the end of October, Hubei Yihua Group has 253 thousand tons of urea, 106 thousand tons of phosphate fertilizers and 41 thousand tons of soda in its warehouse for sale. The urea in stock accounts for 25% of its full capacity. Yunnan Yuntianhua reported a fertilizer inventory as high as 1 million tons. Guizhou Kailin Group and Wengfu Group have accumulated 220 thousand tons and 250 thousand tons fertilizers respectively for sale.
    It is hard to predict the economic prospect, market players tends to hold back purchasing orders or investment plans. Fears are making the downturn heavier. Price drops arose on most chemicals, according to CPCIA. The gross margin was averaged at 8.43% for China's petroleum and chemical industry in the fist eight months, comparing to the 10.77% in the same period of 2007. Statistics on investment for the first three quarters disclosed a year-over-year growth of 35.7%, still over high.
   The economic slowdown globally can be a favor factor helping China shift the current rough, high pollution, high consumption mode into sustainable development. Government's worry about the overheated investment seven months ago disappointed itself. (CCR2008 No.9)

Zhong Weike
November 12th, 2008