Domestic firms to drive China’s chemical sector growth, finds KPMG report

Domestic firms to drive China’s chemical sector grow...


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China's chemical industry is expected to see its revenue expand at 9-11 percent between 2013 and 2015, with domestic firms largely driving growth, according to KPMG’s latest report on the sector. 

The report titled China’s chemical industry: The emergence of local champions highlights China’s stable economic growth. Together with steady urbanisation and infrastructure plans, ambitious sustainability targets, and a large Chinese middle class driving demand for consumer, auto, IT and electronic products, these factors all provide ample growth opportunities for the chemical industry in China. 

Norbert Meyring, Partner, KPMG China and Chemical Sector Head for China and Asia Pacific, says: “Chinese companies have reached a certain stage of development and are now increasingly exposed to global competition. The government too has adopted ambitious targets with regards to sustainability and self-sufficiency and chemical companies are expected to respond to this challenge. Driven by these forces, the industry is trying to restructure itself in order to become more competitive and rise up the value chain. This is evident from the emergence of the synthetic materials and specialty chemicals segments and the marginal retreat of basic chemicals.” 

Along with setting up mega production bases and expanding their product range in an integrated manner, Chinese companies have begun to innovate and are swiftly incorporating technological changes into their production processes, the report notes. Enterprises have also shifted their priority from production to brand management, upgrading from product to providing solutions to their customers and internationalising their businesses. 

The report notes that overseas investments have now reached a turning point, with a number of companies now promoting their brands in the global market and assessing overseas acquisitions. The large Chinese petrochemical companies previously targeted big-ticket acquisitions, however are now also considering mid-cap foreign assets, as these will provide them with specific technology and international marketing networks. 

Meyring concludes: “A large number of Local Champions now represent formidable competition to global companies. While state-owned enterprises have scaled up their operations and ambitions abroad, private companies have also consolidated their operations, becoming more competitive and profitable and restructuring their management systems.”

“Chinese companies have graduated from makers of bulk chemical raw materials to upgraded products and are now keen to conquer overseas markets. However, as the Chinese chemical industry grows bigger, it faces a number of increasingly complex challenges. From feedstock to HR issues, every level poses its own difficulties. There is still a long way to go, however our view is that China’s chemical industry is set for rapid and far-reaching transformation.”


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