China And Tearing Up The Rule Book: A Ten-Point Guide

Business, China, Company Strategy

By John Richardson

WE thought it would be helpful for chemicals to summarise our thoughts on China as chemicals and other companies prepare their strategies for 2015.

LongroadaheadSee our ten-point guide below, with relevant links to our previous coverage and coverage elsewhere:

  1. The Deng Xiaoping growth model went on far for too long, especially post 2009, and has inflicted serious damage on the Chinese economy – bad debts, overcapacity, the environment and income inequality etc.
  2. The new leadership have made it crystal clear, ever since they took power, that this model would have to be dismantled.
  3. It was clear from late last year, and perhaps earlier, that this was very likely to happen in 2014.
  4. No chemicals company should be surprised, therefore, if the “official”, but actually fictitious growth number is missed.
  5. Instead they should focus on strategies to deal with how bad it will get before it gets better (and it will get a lot better, we think. Future growth prospects are nothing short of tremendous).
  6. How long will this take? At least five years, during which we should prepare for all sorts of disruptions to the old way that the economy – and so chemicals markets – behave.
  7. Good guides to the extent of economic strength will continue to be loan growth, electricity consumption, rail freight movements – and also chemical industry operating rates.
  8. The more that loan growth, and the rest of these measures, revert back to previous levels before rebalancing has been completed, the more this is bad news in the longer term; it means the government has listened to all the clamour out there.
  9. They won’t listen because they know they would make the eventual rebalancing much harder by adding to bad debt and overcapacity problems etc.
  10. Crucially, they don’t have to listen, from a popularity and so political survival standpoint because a.) blue collar labour markets are incredibly tight, with graduate unemployment now the issue. And you won’t create enough jobs for graduates by pursuing the old growth model, and b.) the public want these changes – e.g.  discontent over income inequality and the environment.
PREVIOUS POST

Why China's Anti-Corruption Campaign Has To Continue

23/09/2014

By John Richardson CHINA’s anti-corruption campaign is now more than two years...

Learn more
NEXT POST

Diesel Demand In China To Fall As Banks Hoard Cash....

25/09/2014

..…LETTERS OF CREDIT TAKE 5-6 WEEKS TO OBTAIN, UP FROM 5-6 DAYS – TH...

Learn more
More posts
Why China’s polyethylene imports could be either 22m tonnes or 3m tonnes in 2030
27/10/2020

By John Richardson THERE are so many angles to this that, as with the potential outcomes of the US p...

Read
Debate about refinery closures, re-configurations a harmful distraction for the petrochemicals business
25/10/2020

In the second of a four-part series of blog posts that examines the paradigm shift confronting the p...

Read
Developed world polymers demand: layer after layer of new complexity
22/10/2020

By John Richardson THE PROPOSITION that petrochemicals and polymers demand in the developed will see...

Read
China rapid rebound promises another great year for petchems, but beware of the fault lines
20/10/2020

By John Richardson IT helped immensely that as the rest of the world was shutting down, China’s fa...

Read
Plastic rubbish: the pandemic is increasing rather than reducing the pressure for change
18/10/2020

This is the first of a series of blog posts where I will examine the environmental paradigm shift an...

Read
Retreat of globalisation and implications for petrochemicals
15/10/2020

By John Richardson EVER SINCE the Berlin Wall fell in 1989, and the last great geopolitical struggle...

Read
European petrochemicals at risk of delayed demand collapse as new business model emerges
06/10/2020

By John Richardson AS DELEGATES take part in this year’s virtual annual European Petrochemical Ass...

Read
US polyethylene: resilient demand could be at risk from delay to new stimulus
04/10/2020

By John Richardson THIS REMAINS a mystery that needs to be solved: why US polyethylene (PE) markets ...

Read

Market Intelligence

ICIS provides market intelligence that help businesses in the energy, petrochemical and fertilizer industries.

Learn more

Analytics

Across the globe, ICIS consultants provide detailed analysis and forecasting for the petrochemical, energy and fertilizer markets.

Learn more

Specialist Services

Find out more about how our specialist consulting services, events, conferences and training courses can help your teams.

Learn more

ICIS Insight

From our news service to our thought-leadership content, ICIS experts bring you the latest news and insight, when you need it.

Learn more