The risks of China's booming economic growth

19-May-05

China's petrochem industry has seen tremendous growth, triggered by a booming economy. However, the Chinese economy is facing its share of problems. The gap between the urban and the rural, and the rich and the poor in China is widening and could cause domestic problems. The imbalance in demand-supply exerts a good amount of pressure on domestic producers to conform to the standards of global scale producers. Lack of domestic competitiveness could lead to higher domestic prices, adversely affecting demand for petrochemicals. The potential risks will be significantly reduced if managed well, leading to continued growth in the Chinese petrochemical industry. There is a need to control the economy while domestic industries and banking reforms, and the large amount of non-performing loans in the private sector is taken care of. China imports over 40% of its crude 'requirements, and lack of development of the power generation sector could also impede progress. The China factor, is a delicate balance between positive and negative, and should continue to generate good returns for the companies able to maintain their competitiveness in the ready markets. China's strategy to economic growth is pragmatic and non-ideological. In a bid to attract funds, technology, expertise and management skills, China's policies and practices will continue to conform to international standards. The fundamentals for continued economic growth are strong, with the petrochemical supply deficits set to be met by both domestic investments and continued large-scale imports. (based on Nexant ChemSystems Seminar on the Middle East Petrochemical Industry)