Chemical firms prepare for slower economic growth

Chemical companies from home and abroad have felt the pinch amid slowing domestic economic growth in China, but remain optimistic about their long-term prospects in the country.

The Swiss specialty chemicals company Clariant AG, which has invested 200 million Swiss francs ($204.63 million) in China over the past five years, said its growth in the country this year has not been as strong as before.

"We're seeing a little bit of concern that the Chinese market right now doesn't seem to be too promising," said Hans-Joachim Muller, speaking before he resigned as a member of Clariant's Executive Committee on June 30.

The People's Bank of China slashed the country's benchmark interest rates last week after making a similar move in June, sending a signal that the country's economic expansion in the second quarter may "have surprised to the downside" to 7.5 percent, according to Barclays Capital.

China's GDP dropped to 8.1 percent in the first quarter from 9.2 percent a quarter earlier.

The slowdown has also made the chemical industry feel the chill.

"This year is very difficult. We don't expect any sales growth, but hope not to drop much," said Wang Dazhuang, general manager of Shenyang Chemical Group Co.

The State-owned enterprise recorded 33 percent year-on-year revenue growth last year.

The country's chemical sector is highly competitive, and a cooling down of the economy only serves to worsen the situation, Wang said.

The nation consumed 31.3 million metric tons of ethylene last year, and the quickening pace of housing construction in China is expected to result in an 8 percent rise in domestic synthetic resin consumption within five years, said Li Chen, deputy chief engineer of the China National Petroleum and Chemical Institute.

Although he said the market was "volatile", Muller expressed confidence in the chemical industry's prospects.

"We truly believe the Chinese population will continue to generate more wealth when more people are moving up to the middle class, more polypropylene will be consumed," he said.

The Asia-Pacific, the Middle East and Africa were the sources of 30 percent of Clariant's total sales last year, up from 23 percent in 2005.

Hariolf Kottmann, CEO of Clariant, said in late June that China and India will be priorities for the Swiss company.

The company opened its first ethoxylation plant in Asia in Daya Bay in Huizhou, Guangdong province, last November. It has an annual production capacity of 50,000 tons.

zhouyan@chinadaily.com.cn