Over the past decade, China’s chemicals market has undergone significant transformation, emerging as the world’s largest and most dynamic chemicals industry. The country has evolved from a regional player into a global powerhouse, commanding substantial influence over various segments of the global chemical industry. This growth has been driven by increased domestic demand, industrialisation, environmental regulations, technological innovation, and an expansion of downstream sectors.

China’s chemical industry is the largest in the world, accounting for approximately 45 per cent of global chemical sales as of 2022, a dramatic increase from its share of around 30 per cent a decade ago. The country’s market continues to expand due to its strategic focus on building chemical production capacity and bolstering exports. One of the key drivers of this growth is China’s vast industrial base, which spans multiple sectors like automotive, electronics, pharmaceuticals, and construction. These industries consume vast quantities of chemicals, ensuring robust domestic demand. China’s urbanisation, infrastructure development, and rising middle class have also led to increased consumption of plastics, adhesives, coatings, and specialty chemicals used in consumer goods, housing, and transportation.

Key segments of China’s chemicals industry are diverse, encompassing several key segments, including petrochemicals, polymers, agrochemicals, specialty chemicals, and basic chemicals. Each segment has experienced distinct growth patterns over the last decade.

Petrochemicals: As the backbone of China’s chemicals industry, the petrochemical sector has seen significant expansion. China is the world’s largest producer of ethylene, a key building block for various plastics and chemicals. In 2022, China’s ethylene production capacity exceeded 45 million metric tons, compared to around 17 million metric tons in 2012. Petrochemical production is closely linked to the refining industry, and China’s refining capacity has also grown, surpassing 17 million barrels per day in 2023, making it the second-largest refining hub globally, behind the US.

Polymers and Plastics: The production and consumption of polymers have surged over the past decade. China is now the world’s largest producer of plastics, with an annual output exceeding 100 million metric tons as of 2022. Major industries driving this growth include packaging, automotive, electronics, and construction. China’s dominance in polymer production is also reflected in its exports, as it has become a major supplier of plastic materials to global markets.

Agrochemicals:  Agrochemicals, including fertilisers and pesticides, are critical to China’s vast agricultural sector. China is the world’s largest producer and consumer of nitrogen-based fertilisers, and accounts for about 30 per cent of global fertiliser production. In 2021, China produced over 50 million metric tons of nitrogen fertilisers. Over the last decade, the country has shifted towards producing more environmentally friendly agrochemicals, in response to tightening environmental regulations and the need to improve agricultural sustainability.

Specialty Chemicals: This segment has experienced the most dynamic growth over the past decade, with increasing demand for high-performance chemicals in industries such as electronics, automotive, pharmaceuticals, and renewable energy. Specialty chemicals, including adhesives, coatings, and catalysts, are crucial in manufacturing processes for sectors like electric vehicles (EVs) and electronics. China’s booming EV market, the largest in the world, has led to a surge in demand for battery chemicals, particularly lithium-ion battery components like electrolytes and separators. In 2022, China accounted for more than 75 per cent of global battery chemical production.

Basic Chemicals: China remains a major producer of basic chemicals like sulphuric acid, caustic soda, and ammonia. These chemicals are vital for various industrial applications, from metallurgy to water treatment. However, overcapacity in some basic chemicals, such as methanol, and fertilisers has created challenges for the industry, leading to price volatility and reduced profitability for producers.

Over the past decade, China has significantly expanded its chemicals production capacity through heavy investments. Domestic and international companies have invested billions of dollars in building new chemical plants and upgrading existing ones. The government’s Five-Year Plans, especially the 13th (2016-2020) and 14th (2021-2025), have prioritised the chemicals industry as a key sector for technological advancement and capacity expansion.

Also, in recent times, Chinese companies have invested heavily in research and development (R&D). For example, China’s push to dominate the global electric vehicle (EV) market has fuelled innovation in battery chemistry, with companies like CATL and BYD leading in the development of high-performance battery materials. Furthermore, China’s dominance in critical materials for EV batteries, such as lithium, cobalt, and nickel chemicals, has solidified its role as a key player in the global transition to renewable energy. In 2022, China controlled over 70 per cent of the world’s lithium refining capacity, a vital component in lithium-ion batteries.

Over the last decade, China’s chemicals market has grown into a global leader, with its development characterised by massive capacity expansions, technological advancements, and a focus on sustainability. With its dominant position in key sectors such as petrochemicals, polymers, agrochemicals, and specialty chemicals, China has cemented its role in global supply chains. While challenges remain, particularly in environmental sustainability, the country’s chemicals industry is well-positioned to maintain its growth trajectory, driven by domestic demand, innovation, and a focus on green technologies.