The right chemistry: Finding opportunities and avoiding pitfalls in China’s chemical industry

The rise of China is sending ripples through the global chemical industry. While it still represents only a small share of the global chemicals market, its climbing rates of chemical importation and consumption, combined with its rapidly growing economy, expanding middle class, and inland urbanization, make China a market no international chemical company can afford to ignore.

Add to these trends China’s various favorable governmental policies—such as preferential tax treatment for foreign investment that offersintellectual property (IP), research and development (R&D) capabilities, or advanced technology—and it’s no wonder that many international chemical companies have already set up operations there and that others are seeking appropriate points of entry.

Yet challenges abound in the China market, and success is not simply there for the taking. Companies looking to capitalize on the growth of China’s economy and chemical industry must consider the potential obstacles in their path—including the fact that China’s chemical industry remains tightly regulated, and opportunities often depend on which areas of foreign investment are encouraged or restricted by the government. In addition, difficulties surrounding logistics, rising costs, the war for talent, and intellectual property protection create risks for any company setting up or expanding operations in the country.

The good news is that these potential pitfalls are not unnavigable. With intelligent planning and a clear understanding of the local market, companies can go a long way toward mitigating the risks, surmounting the challenges, and reaping the opportunities inherent to the China market.

This paper, prepared by PwC in cooperation with the Economist Intelligence Unit, offers insight into these market opportunities and challenges and maps out many of the entry points that international chemical companies should consider as they prepare to open the door to this new frontier.