Policy Analysis of "Anti-Inner Roll" in China's Chemical Industry: A New Era of Supply-side Structural Reform

Policy background and timeline

since 2024, China has issued a number of anti-"internal volume" competition policies. In July 2024, the Politburo meeting of the CPC Central Committee proposed to strengthen industry self-discipline and prevent "internal volume" vicious competition. In December 2024, the Central Economic Work Conference emphasized the comprehensive rectification of "internal volume" competition and standardized the behavior of local governments and enterprises. In March 2025, the "Government Work Report" called for speeding up the establishment of sound basic system rules, breaking local protection and market segmentation, and comprehensively rectifying "internal volume" competition.

Chemical industry anti-internal special action

starting from 2025, anti-internal discussions will be carried out in many fields of China's chemical industry. On March 13, 2025, the glyphosate industry "anti-internal" conference was held in Beijing, aiming to solve the problems of excessive competition, repeated investment of resources and compression of profit space. On July 1, 2025, the Dangerous Chemicals Logistics Branch of China Federation of Logistics and Purchasing issued an initiative against "internal volume" competition. On July 3, 2025, the Ministry of Industry and Information Technology held a symposium on the photovoltaic industry, emphasizing the comprehensive management of low-price disorderly competition. On July 18, 2025, the Ministry of Industry and Information Technology announced that the work plan for steady growth in ten key industries, including steel, non-ferrous metals, petrochemicals, and building materials, will soon be introduced.

Challenges Facing China's Chemical Industry

china's chemical industry is facing the status quo of disorderly expansion of production capacity, insufficient overall operating rate and serious waste of resources. The production capacity of traditional coal chemical industry is still growing, and the production capacity of soda ash and PVC continues to increase. The overall R & D investment intensity of Chinese chemical enterprises is low, only 1.2 percent of total R & D investment in 2023, and international giants R & D investment accounted for 3%-5%. Product homogeneity is serious, enterprises to take low-price competition strategy, resulting in a lose-lose.

Core differences from previous supply-side reforms

there are significant differences between the current round of reform and the supply-side structural reform in 2015-2018. The early reform mainly reduces excess capacity through the administrative means of "removing production capacity, removing inventory, deleveraging, reducing costs and making up for shortcomings. The "supply-side reform 2.0" highlights the "anti-internal volume", "national unified market" and "high-quality development", shifting from reducing quantity to improving quality and efficiency, and paying more attention to improving resource allocation by market-oriented and rule-of-law means and cultivating new quality productivity.

Capacity Governance and Industrial Structure Optimization

the reform will implement the goal of "capacity management" and draw up a "negative list" to eliminate inefficient supply through hard indicators such as environmental protection standards, dual control of energy consumption and safety access. Establish a precise energy control mechanism by field, implement "capacity warning" for basic chemical raw materials such as ethylene, propylene and PX, and set a capacity ceiling according to the growth rate of downstream demand. For high-end chemicals and new materials products, through special debt, tax incentives and other policies to encourage new production capacity to fill the import gap.

innovation-driven development strategy

the reform will improve the innovation ecology and establish a "pilot incubation platform" to provide small and medium-sized enterprises with equipment and technical support for small and medium-sized enterprises. Strengthen the enforcement of patent infringement in the chemical industry and establish a "patent pool" to avoid duplication of research and development. Leading enterprises are encouraged to take the lead in setting up innovative consortia to tackle "stuck neck" technologies such as electronic wet chemicals for semiconductors, new energy battery diaphragm materials, and high-performance resins for aerospace. Small and medium-sized enterprises can focus on market segments and establish competitive barriers through "small batch, multi-variety and high service.

Industry chain synergy replaces internal volume competition

reform to promote the "industrial chain coordination" mechanism, by the industry association to build a digital platform, the integration of upstream and downstream enterprises capacity, demand, inventory data, reduce information asymmetry. For the cyclical varieties signed a "price protection and stable supply" agreement, through the "wrong peak production", "on-demand adjustment of the operating rate" to avoid price collapse. Encourage enterprises to transform from "single product" to "integrated industrial chain", plan the closed-loop of the industrial chain with the park as a unit, and form a closed-loop production of "raw materials-intermediate products-end products.

Green Transformation Reshapes Competitive Logic

"Greening" has become a rigid indicator for chemical companies. The national level will establish a networking system for environmental monitoring in the chemical industry to impose "one size fits all" penalties on companies that exceed the standard. Through the "green certification" to distinguish product grade, to encourage downstream enterprises to give priority to the procurement of standard products, so that environmental protection investment into a competitive advantage. Promote the "waste interoperability" of enterprises in the park, such as the resource disposal of carbon dioxide in the park, to form a win-win situation of "environmental protection-cost reduction.

International market expansion strategy

in response to the needs of countries along the "Belt and Road", Chinese chemical companies can avoid trade barriers through technology authorization and joint venture construction, and convert domestic excess high-end production capacity into overseas market share. Powerful enterprises can actively acquire overseas high-end technology enterprises, quickly cut into the high-end market, and reduce the "internal competition" of independent research and development ".

Reform Impact and Future Prospects

the supply-side structural reform 2.0 represents the transformation from "scale expansion" to "value enhancement", and builds a new development ecology that avoids "internal volume" competition by eliminating inefficient production capacity, innovation-driven, green transformation, international market development, and integration and coordination of park enterprises. This comprehensive reform will reshape the competitive landscape of China's chemical industry and promote the transformation of the industry to high-quality development.