China's petchem package provides much-needed boost - analyst

22 January 2009 05:49  [Source: ICIS news]

(Releads with analyst's views)

By Bohan Loh

SINGAPORE (ICIS news)--China’s plan for a massive fiscal stimulus aimed specifically at the petrochemical industry is a welcome development that should tide the sector over during a difficult period, an analyst said on Thursday.

A yuan (CNY) 500bn ($73bn) package is being mulled for the industry, according to state media reports on Thursday, quoting a senior official from China Petroleum and Chemical Industry Association (CPCIA).

“It is surely a piece of good news for the petrochemical industry at large during this trough in the cycle. The government also wants to help chemical companies survive from this global crisis,” said analyst Arden Dai of Frost and Sullivan in Shanghai

The stimulus package will include a CNY100bn investment in 2009 and 2010 for upgrades in oil products, and an investment of CNY400bn for the construction of 20 new large-scale petrochemical projects, according to China Daily.

Up to CNY100bn of the package will be funded by petrochemical giants Sinopec and China National Petroleum & Chemical (CNPC), according to media reports.

"The draft of this stimulus package hasn't been completed or examined by expert panels and it will be submitted to the State Council for approval later," CPCIA secretary-general Sun Weishan was quoted as saying.

Sources from the China State Council, the country’s chief administrative authority, were unable to comment about the proposed package when contacted by ICIS news.

The Chinese government had sought suggestions from various research organisations to plan the financial support package for the industry, said a source from the China National Petroleum & Chemical Planning Institute, a state-run think tank.

But the suggestions were very general and no specific amounts were mentioned, the source said.

Frost & Sullivan’s Dai said he expects the Chinese government to also loosen licensing regulations on 20 petrochemical projects under the proposed package.

“This petrochemical package, combined with the announced stimulus for the steel and automobile industries, should produce synergies that would push demand for basic chemicals in the future,” Dai said.

The State Council unveiled on 16 January an economic package for its ailing auto and steel industries.

The package involves lowering car purchase taxes, an allocation of CNY5bn to provide one-off allowances to farmers to upgrade their vehicles, as well as ear-marking as much as CNY10bn as a special fund to support companies in research and development activities.

On 21 January, the government also announced a massive medical reform plan worth up to CNY850bn to provide universal health care to the country's 1.3bn citizens through to 2011.

China has been implementing fiscal and monetary policies to prevent a sharp deceleration in its GDP growth amid extreme weakness in external demand.

($1 = CNY6.84)

Judith Wang and Chow Bee Lin has contributed to this story
To discuss issues facing the chemical industry go to ICIS connect


By: Bohan Loh
+65 6780 4359



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