China aims to reduce imports

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China has been a major beneficiary of the globalisation movement in recent years.

In turn, it has become a tremendous importer of most chemicals. It accounts for up to 50% of total demand for many Asian chemical producers, and is a critical factor in most supply/demand balances.

This position was already changing, however, as China moved to expand its own production.

Now, the Wall Street Journal reports that the National Development and Reform Commission (NDRC)), one of China’s most important government bodies, has co-authored a directive that “appears to require that Chinese companies should receive contracts for government stimulus projects”. The only exceptions would be for “engineering goods or service that cannot be obtained under reasonable business conditions inside China”.

In many ways, this move towards protectionism mirrors the ‘buy American’ provision inserted into the recent US stimulus package (which has already upset the Canadian government). It also suggests that, with exports still down 26% last month versus 2008, and showing no signs of early recovery, that China is focusing more and more on stimulating its domestic economy.

Many in the chemical industry, and elsewhere, had hoped that China could help lead a recovery in the global economy. Unfortunately, it seems quite possible that China is instead slowly turning its back on world trade. The blog therefore fears that those exporters who are relying on Chinese growth to stimulate demand may well be disappointed.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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