Deep Analysis of Policy Reshaping and Market Opportunities in China's Chemical Industry

Policy-driven Industrial Adjustment: Opportunities and Challenges

intensive policy signals change

china's chemical industry is undergoing an unprecedented period of policy reshaping. On July 4, 2025, the Ministry of National Emergency Management issued the "Chemical Plant Aging Assessment Method (Draft for Comment)", and the National Development and Reform Commission issued the "New Material Pilot Platform Construction Guide." More importantly, Jiangsu Province's "Chemical Industry Structure Adjustment Restriction and Elimination Catalog 2025 Edition" and Hubei Province's "Hazardous Chemicals Prohibition, Restriction (Control) System, Elimination and Encouragement Policy Catalog List (2025 Edition)" The introduction indicates that policy implementation has penetrated from the national level to the local implementation level.

According to internal sources, the Ministry of Industry and Information Technology is formulating a specific plan to curb low value-added overcapacity, which is expected to be officially released in September. The core goal of this policy combination is to accelerate the adjustment of industrial structure through administrative means and promote the chemical industry from scale-oriented to quality-oriented.

The Market Reality of Structural Surplus and Supply Gap

serious overcapacity in traditional areas

at present, China's chemical industry presents a typical pattern of "ice and fire. In the field of traditional chemical industry, the problem of overcapacity is shocking:

• the utilization rate of ethylene-polyethylene capacity is less than 70%, and a large number of units are operating at low load.
• The utilization rate of nitrogen fertilizer and phosphate fertilizer capacity is less than 70%, which is in contradiction with the slowdown of agricultural demand growth.
• Caustic soda has nearly 4 million tons of excess capacity, prices continue to be under pressure.
• Part of the traditional coal chemical capacity utilization rate of less than 40%, environmental protection and cost constraints.

Serious shortage of high-end material supply

in sharp contrast is the supply gap of high-tech products:

• electronic chemicals (photoresist, electronic special gas) import dependence of more than 60%
• EUV photoresist, G5 high-purity reagents are still completely monopolized by U.S. and Japanese enterprises.
• The import volume of bio-based polyamide exceeds 100000 tons, and the import dependence is close to 80%

this structural mismatch reflects the shortcomings of the development model of China's chemical industry that has long relied on scale expansion while ignoring technological innovation, and also provides clear direction for overseas chemical companies to invest in China.

Market Reconstruction and Investment Opportunities under Policy Impact

mandatory de-capacity into the substantive stage

the notice on promoting the standardized construction and high-quality development of chemical parks requires that the professional transformation of chemical parks below the third level of competitiveness should be completed by the end of 2025, and the identification of new parks should be suspended. The Action Plan for Energy Conservation and Carbon Reduction in Key Petrochemical Industries with Strict Energy Efficiency Constraints clearly states that millions of tons of ethylene production capacity and more than 60 million tons of refining capacity will be eliminated in 2025.

Shandong, Jiangsu, Guangdong and other key chemical provinces have started the process of chemical enterprises entering the park, and plan to eliminate about 15% of backward enterprises. This means that China's chemical industry has officially entered the "passive capacity" stage, creating market entry opportunities for overseas companies with technological advantages.

reallocation of capital flows

the trend of market differentiation is becoming more and more obvious. Traditional products face severe challenges: PDH industry due to high raw material costs, more than 30% of the device was forced to stop production.

In contrast, emerging areas performed well: in 2024, the market size of lithium battery materials increased 35% year-on-year, and the profit margin of head enterprises increased by more than 15%. The market size of bio-based materials reached 80 billion yuan, and enterprises such as Fujian United and Ningxia Baofeng launched carbon dioxide recycling projects one after another.

M & A integration becomes the norm

in 2024, the amount of mergers and acquisitions of chemical enterprises reached 150 billion yuan, up 20% year on year. Typical cases include the acquisition of Sinochem Blue Sky to build a fluorine chemical "national team", Salt Lake shares and China Minmetals to form China Salt Lake Industry Group to integrate potassium resources, etc., showing that industry integration is accelerating.

For overseas investors, this wave of integration is both a challenge and an opportunity: on the one hand, local enterprises quickly become bigger and stronger through mergers and acquisitions; on the other hand, it also provides more choices for overseas enterprises with technological advantages to find partners or acquisition targets.

Strategic opportunities for overseas investors

technology export and joint venture cooperation opportunities

china's policy clearly supports the technology introduction and industrialization of high-end chemical materials. The implementation Plan for the Innovation and Development of the Fine Chemical Industry (2024-2027) puts forward the goal of significantly increasing the localization rate of high-end polyolefins, electronic chemicals and other key areas by 2027, providing a broad space for cooperation for overseas enterprises that master core technologies.

Market Segment Investment Value

in the context of mandatory de-capacity, enterprises with environmental protection technology and energy-saving technology will receive policy preference. Green chemicals, bio-based materials, and circular economy-related technologies have become investment hotspots. The technical thresholds in these fields provide differentiated competitive advantages for overseas advanced companies.

Participation Opportunities for Supply Chain Restructuring

as China's chemical industry accelerates its transformation to high-end, the global supply chain landscape will undergo profound changes. Overseas enterprises can participate in the upgrading process of China's chemical industry through technology licensing, equipment supply and engineering services, and find their own position in the new industrial ecology.

This round of in-depth adjustment of China's chemical industry is not only a challenge, but also a historical opportunity for the global chemical industry to reshuffle. For overseas chemical practitioners, an in-depth understanding of China's policy orientation and an accurate grasp of market trends will be the key to success in this change.