China is becoming an exceptional user and supplier of chemicals and due to its growth potential and high demand within and beyond including its western counterparts who are now being left behind due to Chinas cheap labor advantage. China will become the 2nd largest producer of chemical and chemical related goods in 2015 after U.S.A and an expected growth of 5% with revenue reaching to EUR 400 billion (Perlitz 2005). Currently, China has a capacity to produce well above 2million tons of ethylene which is subject to change due to natural calamities and other uncontrollable factors (Perlitz 2005).
The chemical giants in china are being financed by joint direct investment by foreign countries or business partners who could improve if less bottle necks are observed as far as logistics are concerned within china. The plant capacity of china is unmatchable having a high demand and comparatively low wage of cost. It is a capital intensive industry.
Some huge Chinese chemical companies are: China National Petroleum Corporation (CNPC), China National Petrochemical Corporation (Sinopec), China National Offshore Oil Corporation (CNOOC) and China National Chemical Corporation (CNCC) respectively.
Basic petrochemical and the chemicals market in general only take up projects that are above or equal to a volume of 800,000 tons (Perlitz 2005).
The primary focus of china is on basic chemicals like ammonia, benzene, chlorine, ethylene and propylene which are used in manufacturing the feedstock of cattle and other animals. The German BASF along with Sinopec (china) initiated a plant in Nanjing having 1,500 workers altogether (Perlitz 2005).
There are two chemicals that are used in producing plastics which are ethylene and propylene for ship building, house hold goods and toys. Some chemicals for a large number of flavors, scents, additives, adhesives, coatings etc are also produced in china having a market share of about 30%.
Apparently, Asia holds 50% of chemical fiber share with 25% share held by china alone. These are synthetic fibers as compared to the natural fibers because of the increasing demand which cannot be fulfilled through the production of huge quantities of natural fiber. China also holds the position for being the biggest exhibiter of synthetic dyes producing around 600,000 tons per year (Perlitz 2005).
Apart from Chinas production capacity certain loopholes are present; For instance, china imports resources and raw materials which are not available internally and there is a limited energy supply having costly methods of producing or buying oil, gas, petrol for generators (Perlitz 2005).Research indicates that once industries like automobile, electronics and construction thrive the chemical industries out put will increase simultaneously.
Shanghai being the most populous city of china has established the first industrial zone developing petrochemicals and other chemical endeavors and is amongst the 4 industrial production bases in shanghai. The chemical park facilitates investors providing them with public utilities, logistics, administrative and environmental protection services (SCIP 2010).China is also an emerging market as far as pharmaceuticals are concerned with most of the establishments state owned. The development would require some time to compete with the western pharmaceutical companies (Le Deu 2008).
Sinopec is a major state owned company dealing with petrochemicals and chemicals in general having a refinery of chemical integrated petrochemicals situated in Jinshan District of Shanghai (Sinopec corp. 2011). And the private companies include chem.net respectively (Chinachemnet 2011).
Following are the companies that have been noted to import chemicals from China from past few decades. As per the surveyed list companies published by Chinachemnet, following companies can be considered for analysis (Chinachemnet 2011):
Foreign private companies importing chemicals from china:
- The Dow Chemical Company
- Arch Chemicals, Inc
- Eastman Chemical Company
- Evershine Chemical Co Ltd
- Qingdao Lianda Chemical Co.,Ltd
- Evershine Chemical Co Ltd
- Wealson Water Treatment Chemical
- Reddy and Reddy Pharmaceuticals
- Wuhan Bright Chemical Co., Ltd.
- ShangHai Hongda Chemical Company
Below are the 10 companies that are exporting to foreign countries for a long time and have varied solutions (chinatoday.com 2011).
Chinese companies that are exporting their products overseas:
- Shouguang Jilong Light Industry Products Co. Ltd.
- Yancui (Shanghai) Imp. and Exp. Corp. Ltd.
- Suzhou Everfortune Imp. and Exp. Co. Ltd.
- Qichang Chemical Co. Ltd.
- Kunshan Huaxin Daily Chemicals Co. Ltd.
- Jiali International Corp.
- Wuxi R and D Chemical Co. Ltd.
- Tianjin Xiangyue Sealing Material Co. Ltd.
- Yangzhou Criss Cross Biotech Co. Ltd. (1-Bromo-5-Chloropentane)
- Wuhan Hezhong Chemical Manufacture Co. Ltd.
Choosing an entity status is the key while conducting business with the Chinese locals, through representative offices, private or public firms, and Joint ventures. The next step is to identify your self by processing what your business plan should be and then determine and find a liaison who is preferably a native Chinese. And finally hire people you consider feasible and have the expertise to run your imports and highlighting the right position for the office in china.
China prohibited private entities from engaging in export trade. Be certain that the proper procedures are followed such as introducing yourself as an importer and documentation. The documents that could be required are articles of incorporation, license, certificates, bank letter and description of the business activity.
Agri foods Asia has its branches throughout but the Chinese branch assists its foreign clients resolving their queries and concerns (agrifoodasia.com 2005)
Finding the products that has to be imported for instance in this case chemicals needs some things to be understood before hand: having a cultural consideration, maintaining supplier relationships, negotiating, shipping/freight forwarding, paying suppliers and outsourcing.
Investigating the Chinese company is very important before going down doing business with them making the settlement for payment legitimate, these companies are extending easy credit but a long term perspective needs to be kept in mind while committing.
Contacting china savvy.com can give importing companies great insights on the procedural grassroots approach while starting up imports, exports or any business for that matter in china (chinasavvy 2006).
Choosing suppliers carefully is extremely important and no trade fairs to be left unattended which is an effective way of meeting potential suppliers. Contacting the authorized resellers is extremely important (Healy 2010 ). Some aspects that need to be considered are Transportation cost: sometimes the transportation cost exceeds the products original cost and custom clearance issues and language barrier needs to be overcome (Liu 2006).Imports consulting can be carried out in a dedicated manner and units set up to handle the import documentation and freight (Galey 2010)
Import/export bank of china is a reliable resource as far as general information and funding leverage in concerned (China EXIM Bank 1994)The proper import/export information can be gathered by visiting the web for Chinese 109th import/export fair (China Foreign Trade Centre 2010).
List of References
Agrifoodasia. 2005. About Us. Web.
China EXIM Bank, 1994. China EXIM Bank(The Export-Import Bank Of China). Web.
China Foreign Trade Centre, 2010. Canton Fair Online. Web.
Chinachemnet, 2011. ChinaChemNet Contact Us. Web.
chinasavvy, 2006. China Savvy Home. Web.
chinatoday. 2011. Chinas Suppliers Chemicals. Web.
Galey, T., 2010. Three Chinas Consulting. Web.
Healy, A., 2010. Australia China Connections(The Bilateral Business Bulletin). Web.
Le Deu, F.N.P.S.D., 2008. Seizing Chinas Pharma Opportunity. In Le Deu, F.N.P.S.D. Seizing Chinas Pharma Opportunity. The Mc Kinsey Quartely. p.12.
Perlitz, U., 2005. Chemical Industry in China : Overtaking the competition. Frankfurt: Deutsche Bank Research.
Sinopec corp., 2011. Sinopec corp. Web.