Commentary: China chemicals could be sidelined by ASEAN bloc

27 February 2012 00:00  [Source: ICB]

China could be usurped as the most important engine of global chemical industry growth by the ASEAN (Association of Southeast Asian Nations) countries.

Although the country has grown swiftly to become the world's largest chemical market, there are trends affecting it that might cause a lot of manufacturing to shift further afield.

China has an aging population and this will impact the chemical industry in the short and long term. Firstly, the supply of plentiful, cheap labor is drying up. With steep wage inflation and the prospect of a labor shortage, especially among the educated and technically proficient part of the population, CEOs of global manufacturers are already looking for alternative locations. The chemical industry is sure to follow.

The other issue is domestic demand. An aging population will require a different portfolio of products focused on health care rather than consumption of big-ticket items such as cars and electrical goods. This may curtail the exceptional growth of the past decade.

Some chemical company CEOs are already prepared for this shift. Patrick Thomas, CEO of Bayer Material­Science, says its production base in Thailand positions the German polymers producer well for the next wave of global industry growth.

By: Will Beacham
+44 20 8652 3214

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