In recent years, several key policies have significantly influenced the petrochemical industry in China. One such policy is the adjustment of margin requirements. This policy directly affects companies engaged in processing imported materials. After reviewing a number of enterprises, it was found that if a company can complete the verification process within three months, its financial costs will increase by approximately 4%. This added burden may challenge smaller firms with limited resources.
Another major factor is the tightening of environmental regulations. As these regulations become more stringent, their impact on the use of petrochemical products is expected to grow. For example, the EU REACH regulation, which came into effect in June 2007, has set higher standards for chemical safety. In China, environmental protection measures have also been strengthened and are already influencing the chemical sector. Policies restricting emissions and prohibiting pollution in river basins have led to the closure of some polluting and technologically outdated enterprises, resulting in a consolidation of chemical production. Additionally, waste recycling initiatives are altering demand patterns, particularly through the reuse of waste plastics, the recycling of polyester bottles as raw materials, and the use of scrap tires as substitutes for SBS in asphalt modification.
Regarding import tariffs, since China joined the WTO in 2002, the tariffs on petrochemical products have steadily declined. The tariff on synthetic resins dropped to 6.5% in 2008, marking the full implementation of the tariff reduction commitments made upon entry. Although the tariff on synthetic resins fell by 10% over six years, the annual decline was relatively modest, so the overall impact on the domestic petrochemical market has remained limited.
The country’s austerity financial policy has also had an effect. With tighter monetary policies, corporate financing costs have increased. Since 2005, manufacturing investment in China has maintained a high growth rate, often exceeding 30%. This has led to the continuous expansion of new production capacity. However, market demand has not kept pace, leading to overcapacity in certain sectors. Analysts have raised concerns about economic overheating, and it is anticipated that in 2008, the government would continue to implement a tight monetary policy, with interest rates likely to rise further. This would increase borrowing costs for businesses and help curb excessive expansion of production capacity.
Additionally, the appreciation of the Renminbi has reduced the competitiveness of domestic products in international markets. On the other hand, the Beijing Olympics are expected to stimulate the domestic tourism market, thereby boosting demand for plastics and synthetic fibers. This includes the inflow of direct foreign investment before the event, increased tourist numbers after the Games, and the working capital managed by the Olympic Organizing Committee, all of which contribute to GDP growth. Moreover, the 10 billion yuan investment in the Beijing Olympics is estimated to have a 40% impact on foreign visitors in the city.
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