Foreign Investment in China Shows New Trends
According to the most recent data from IBM Factory Layout International, which monitors global investment trends, China has maintained its position as a top destination for foreign direct investment (FDI) in the chemical and pharmaceutical sectors for three consecutive years. Between 2003 and 2005, FDI in these industries accounted for 24% of all investments in China. While production-related investments declined, there was a significant increase in R&D-focused projects, with the latter nearly doubling during this period.
IBM’s analysis also revealed that globally, the number of FDI projects in the chemical and pharmaceutical industries decreased over the same three-year span. In China, the number of such projects peaked in 2003 at 275, then dropped to 195 in 2005. Similarly, in the U.S., the number of FDI projects fell from 153 in 2003 to 104 in 2005.
Regionally, FDI in the chemical and pharmaceutical sectors shifted significantly between 2003 and 2005. Asian developing markets, including China, India, and Thailand, accounted for one-third of all identified FDI projects. During this time, production-related FDI in China fell by approximately 10%, making up 60.3% of total chemical FDI projects in 2005. Meanwhile, R&D-related FDI nearly doubled, showing a clear shift in focus toward innovation and long-term growth.
Kevin Swift, chief economist at the American Chemistry Council (ACC), highlights that China is increasingly becoming a “global manufacturing hub,†with strong long-term potential for the chemical industry. With a chemicals market valued at $264 billion annually, China ranks third worldwide, behind only the U.S. and Japan. In 2005, it became the third-largest chemical producer, surpassing Germany's output of $223 billion.
The China Chemical Industry Park, supported by the China Petroleum and Chemical Industry Association, plays a crucial role in attracting foreign investment, promoting industrial growth, advancing technology, and boosting regional economies. Major petrochemical companies are planning substantial investments: Chinese firms aim to invest $20 billion by 2010 to expand their olefins and derivatives capacity. Dow Chemical, for instance, plans to invest over $200 million to grow its epoxy resin business in China.
Several major joint ventures have also expanded their presence in the country. Shell and CNOOC have launched a $4.3 billion petrochemical complex in Daya Bay, Guangdong, which is now operational and targets the region’s 20% share of China’s overall chemical demand. Additionally, BASF and Huntsman invested $1 billion in an isocyanate joint venture in Shanghai, which has also started production and is contributing to the growing chemical landscape in China.
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