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The chemical industry has once again experienced a “year of deficitâ€
The chemical industry has once again faced a year of trade deficit, contrasting sharply with China’s long-standing trade surplus in other sectors. Historically, the chemical industry has consistently maintained a significant trade gap. Over the past three decades of reform and opening up, however, China's petroleum and chemical sector has made substantial progress, achieving remarkable growth in import and export activities.
China's chemical trade volume reached $319.79 billion in 2007, marking a 25% year-on-year increase and outpacing previous growth rates by 4.3 percentage points. Despite this impressive expansion, the trade deficit in the oil and chemical sector continues to grow. One key factor is the rising demand for imported raw materials, especially crude oil, which contributed significantly to the overall deficit.
In 2007, several chemical products saw strong export performance, particularly pesticides, which rose by 20.1% in volume and 30% in value. High-tech and high-value-added chemicals also experienced rapid growth, with specialty chemicals increasing by an astonishing 153.2%, reaching $11.794 billion in exports. This shift indicates a move toward more advanced and diversified exports.
However, some traditional products, such as soda ash and caustic soda, saw declines in export volumes, reflecting efforts to control overproduction and reduce low-value exports. Meanwhile, synthetic resins showed slower import growth, while their exports surged by 33.3%.
Despite these positive developments, the trade deficit in the chemical industry continued to widen, reaching $116.23 billion in 2007—an increase of 10.7% from the previous year. The primary cause was the growing reliance on imported crude oil, which accounted for 67.13% of the total deficit. Rising global oil prices further exacerbated the situation.
Experts also point to the imbalance in China’s chemical industry chain, with many domestic products still focused on general-purpose and energy-intensive materials. This lack of vertical integration leaves the sector vulnerable to market fluctuations and resource shortages.
Internationally, the REACH Regulation poses a new challenge. Implemented in 2008, it requires registration of all chemicals produced or imported in the EU above 1 ton per year. This regulation could significantly impact Chinese exports, especially in downstream industries like textiles and electronics. Companies may face higher costs, reduced competitiveness, and even closures if they fail to comply.
To address these challenges, industry experts recommend focusing on deep-processing and high-tech chemical production, reducing reliance on raw material exports. Developing emerging sectors such as coal chemicals, biochemistry, and silicon-based materials can help upgrade the industry.
Additionally, managing overcapacity in certain sectors—such as yellow phosphorus—remains crucial. Excessive production and competition have led to falling prices and losses. With fixed asset investment in the industry growing rapidly, careful planning is essential to ensure sustainable development.
Finally, Chinese chemical companies must strengthen their international presence, adopt a "go global" strategy, and improve their upstream-downstream integration to reduce costs and risks. Proactive responses to regulations like REACH are also vital to mitigate potential trade barriers and protect export interests.