China's chemical industry is set to continue to expand, with a majority of global respondents in a recent KPMG survey indicating that the country is their top investment location, as capital will increasingly be deployed there.
The survey, titled 2012 Chemicals and Performance Technologies Industry Outlook, surveyed 156 senior chemical executives in the US, Europe and across Asia-Pacific. It found that 63 percent of all executives plan to increase capital spending over the next year. And 90 percent of executives indicated their companies are likely to be involved in a merger or acquisition in the next two years, up from 83 percent in KPMG's 2011 survey.
Most big ticket petrochemical and chemical investments are unfolding in the Middle East, Latin America or East Asia, indicating that these regions continue to hold potential, the survey notes.
An additional new report by KPMG titled China Chemical Industry Enters New Era with Sustainability also points to some of the challenges faced by the sector in China and the increased take-up of sustainable practices.
Norbert Meyring, Partner, KPMG China and Chemical Sector Head for China and Asia Pacific, says: "We see continuing opportunities for China's chemicals market, despite the global economic slowdown. The output of chemicals in emerging markets is expected to outpace production in developed countries. However, the sector is also set to face some challenges as China shifts from a large industrial country to a sustainable model, such as a potential shortage of resources."
"An additional opportunity however for this sector is that growing urbanization in China will continue to drive investment in fixed assets – new factories and infrastructure. Fixed-asset investment is considered the strongest force to drive the country's economic growth."
Additional opportunities in China include tapping into existing shale gas reserves, which it claims is the world's largest.
"While China has not yet started commercial production of shale gas, we see a growing sense of urgency to encourage the development of unconventional energy sources. This will have huge implications for the chemicals industry. Shale gas offers clean energy or energy with lower carbon intensity, and it remains an integral part of the overall strategy in China," Meyring adds.
One of the main aims of China's 12th Five-Year Plan is to upgrade the chemical industry, which is being encouraged to boost technological innovation and new growth opportunities.
Meyring concludes: "China has two ambitious targets, the first of which is to reduce carbon emissions on a significant scale. This means every sector of China's economy and industry will be affected in a fundamental manner. Secondly, it will make more efforts to improve the quality and structure of industrial products in the next five years. Both these targets have tremendous implications for China's chemical industry."
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KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 152 countries and have 145,000 people working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
KPMG China has 13 offices (including KPMG Advisory (China) Limited) in Beijing, Shanghai, Shenyang, Nanjing, Hangzhou, Fuzhou, Xiamen, Qingdao, Guangzhou, Shenzhen, Chengdu, Hong Kong and Macau, with around 9,000 professionals.
The report features insights and commentary from CEOs and other senior executives, working for some of the world's largest MNCs, all with responsibility for China.