In the first half of this year, China's petrochemical industry continued to show a strong growth trend. Major products saw increased production and sales, prices rose steadily, exports expanded rapidly, and overall economic efficiency improved. However, despite these positive developments, several challenges remain. For instance, fixed asset investment remains high, leading to rapid expansion in high-energy-consuming and polluting sectors. The development of energy-saving and emission-reduction technologies is still inadequate, and the industry faces growing trade barriers abroad. Additionally, rising oil prices are adding pressure on the sector. The level of fixed asset investment in the petrochemical industry has remained above 30% for three consecutive years, with an increase rate exceeding 25% from January to May this year. Provinces like Hebei, Inner Mongolia, Anhui, Fujian, Hubei, Sichuan, Shaanxi, and Ningxia have seen particularly high growth. In resource-rich central and western regions, large-scale projects in coal chemical industries, chlor-alkali, calcium carbide, PVC, and synthetic ammonia are intensifying pressure on energy, resources, and the environment, contributing to overcapacity in some sectors. With the opening of domestic crude oil and refined oil markets in 2007, the previous centralized oil allocation system has become outdated. To adapt, it’s essential to reform the oil distribution mechanism, improve the efficiency of resource allocation, and establish a petroleum commercial reserve to ensure supply stability. Continued planning and stronger market oversight are also necessary to maintain a stable domestic market. High-energy-consuming products continue to grow at a fast pace, driven by low entry barriers and strong market demand. Despite government efforts to curb overcapacity, many of these products remain vital to local economies. The lack of alternatives and weak statistical systems for energy consumption and emissions further complicate the situation. There is also a need for better technical support and more active promotion of energy-saving technologies. Exporting low-value-added chemical products remains a challenge. A significant portion of China’s chemicals are basic, low-value, and not highly processed, resulting in a low refining rate compared to developed countries. Domestic companies often engage in price competition, leading to oversupply and poor-quality products. Export markets are concentrated in Asia and Europe, making them vulnerable to external risks. Recent export tax rebate adjustments have hit key sectors such as fertilizers, pesticides, dyes, and two alkalis. These changes have reduced competitiveness and increased domestic market pressures. For example, urea exports face high tariffs during off-seasons, worsening domestic oversupply and lowering prices. Similarly, the soda ash industry is losing ground in Southeast Asian markets due to reduced incentives. The rubber industry also suffered from tax rebate cuts, with potential losses of up to 3 billion yuan. Overall, the petrochemical industry continues to grapple with overcapacity, trade restrictions, and the need for structural reforms to ensure sustainable development.

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