In the first half of this year, China’s petroleum and chemical industries continued to show strong development momentum. Major product production and sales surged, prices rose steadily, exports expanded rapidly, and overall economic efficiency improved. The quality of operations also showed progress. However, despite these positive trends, several challenges remain. For instance, fixed asset investment continues to grow at a high rate, and the expansion of high-energy-consuming and polluting production capacity is accelerating. Additionally, efforts in energy-saving and emission-reduction technologies are insufficient, and the industry faces growing export difficulties due to foreign technical barriers and rising oil prices. The level of fixed asset investment in the sector has remained above 30% for three consecutive years, with an increase of over 25% from January to May this year. Provinces like Hebei, Inner Mongolia, Anhui, Fujian, Hubei, Sichuan, Shaanxi, and Ningxia have seen particularly rapid growth. Many large-scale projects, such as coal chemical plants, chlor-alkali facilities, and PVC production lines, are being developed in resource-rich central and western regions. These projects are increasing pressure on energy, resources, and the environment, contributing to overcapacity in certain sectors. With the opening of domestic crude oil and refined oil markets in 2007, the previous centralized oil allocation system has become outdated. This shift requires reform of the existing oil circulation system, better institutional mechanisms, and more efficient resource management. Establishing a national petroleum commercial reserve is essential to ensure market stability, while improving the industry's development plan and strengthening market regulation will help maintain supply security. Another key issue is the outdated production capacity in high-energy sectors. These products continue to see "three highs" — high production, high investment, and high export growth — due to low entry barriers and strong market demand. Despite government restrictions, there are no viable alternatives yet, which sustains this trend. Meanwhile, energy consumption and pollution statistics remain incomplete, making it difficult to accurately assess the industry's environmental impact. Improving statistical systems and regulatory frameworks is crucial but remains a long-term challenge. Energy-saving and emission-reduction technologies also need stronger support. While some industries have developed mature solutions, the government has not adequately promoted or supported their adoption. This lack of technical assistance hampers the sector’s sustainability efforts. Export challenges are also significant. China’s chemical exports are dominated by low-value-added products, with a low refining rate compared to developed countries. This leads to oversupply and intense competition, both domestically and internationally. Export markets, especially in Asia and the EU, are highly concentrated, increasing exposure to trade risks. Moreover, anti-dumping investigations have hit the petrochemical sector hard, with products like polystyrene and citric acid facing frequent scrutiny. Recent policy changes, such as adjustments to export tax rebates and the imposition of tariffs on certain goods, have further impacted the industry. For example, urea exports face strict limitations and a 15% tariff during off-seasons, worsening domestic oversupply and price pressures. Similarly, the soda ash industry is losing competitiveness in Southeast Asian markets, leading to increased domestic sales pressure. According to the Rubber Industry Association, export tax rebate adjustments could reduce industry profits by at least 3 billion yuan, potentially leading to losses. These challenges highlight the urgent need for structural reforms, better technology support, and more diversified export strategies to ensure sustainable growth in the sector.

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