Chemicals: Commodity Chemicals Industry Shows Strong Competitiveness; High-End Materials Industry Needs Further Improvement

In this chapter we introduce China’s commodity chemicals and fine chemicals & new materials industries, review the driving forces of production capacity transfer as well as the development of representative chemical products, forecast the development trends of the two industries in China, and provide some suggestions for the future development of China’s chemicals industry. Introduction to China’s chemicals industry chain: China is one of the world’s main producers and consumers of commodity chemicals, and has accumulated relatively strong competitive advantages. In the field of fine chemicals & new materials, new material-based downstream applications have recently emerged in China and the quality of these products is dependent on chemical materials. Currently, the new materials segment in China lacks a development trajectory of trial and error, feedback, technological iteration, and improvement. As a result, most Chinese materials manufacturers are only providing low-end and mid-range products, and the gap between these companies and their overseas peers in high-end materials segment that requires strong R&D and has high added value is large. China still relies on imported semiconductor materials as well as high-end display materials. Review and outlook for China’s chemicals industry chain: We review the three rounds of production capacity transfer in the global ethylene market, and note that demand and cost are the main factors determining the industrial transfer of commodity chemicals once technologies mature. The development of Japan's photoresists and China's mixed crystal industries shows that downstream demand is a growth driver of the fine chemicals & new materials segment, while technological iteration also plays an important role in industrial transfer. Regarding the development of China's chemicals industry, we expect China to further strengthen its competitive advantages in major commodity chemicals. However, due to trade barriers, rising labor costs, the green transition, and other factors, some commodity chemicals are facing industrial transfer-related pressure. As for the fine chemicals & new materials segment, we believe that the expansion of downstream industries in China could provide a favorable environment for the development of fine chemicals and new materials. However, factors such as technical barriers, the technological gap between China and other countries, as well as technological iteration may slow the localization of high-end fine chemicals and new materials. China has competitive advantages in the field of new energy materials, but may also be influenced by protective measures taken by developed economies. In the field of high-end materials, in which the localization rate is low, China could concentrate on tackling technical problems, increasing efforts to facilitate downstream applications and tests for domestic materials, improving R&D capabilities, and strengthening cooperation and exchanges with overseas leaders. Regarding new energy materials for which China has strong competitive advantages, the country could accelerate the development of new-generation technologies and proactively build factories in developed countries. As for commodity chemicals in which China has gained some advantages, we expect to see green and sustainable development-oriented companies with global competitiveness. For industry chains facing transfer pressure, we suggest accelerating overseas expansion.