“Despite challenges such as declining capacity utilization and pressure on corporate profitability across the global chemical industry, the Chinese market continues to demonstrate unique growth resilience and will further strengthen its global influence by 2026.” On January 20, Sun Yanyin, Global Partner at Roland Berger, told The Paper (www.thepaper.cn) in an exclusive interview that this resilience stems from China's systemic advantages in comprehensive costs, supply chain integrity, and environmental cost management.
Sun cited data indicating that “the chemical industry's average capacity utilization rate has reached a warning level, with profits among large-scale enterprises declining steadily for five consecutive years and over 20% of companies operating at a loss.” She emphasized that these challenges stem from dual pressures of weak demand and concentrated capacity expansion, with such pressures expected to persist through 2026.
How should China's “counter-cyclical expansion” be interpreted? Sun Yanyin views the widening loss margin not as simple industry decline, but as reflecting internal structural adjustments and the reshaping of global competitiveness. “While ethylene plants are being shut down in multiple regions worldwide, China continues to expand ethylene cracking capacity, with major chemical industry chains steadily concentrating in China.”
Sun explained that growth is primarily driven by a large number of high-certainty projects already in construction or equipment procurement phases, particularly ethylene and downstream cracking units in major petrochemical bases along the southeast coast. “China's substantial new capacity is not fueled by domestic ‘internal competition,’ but rather by capturing global capacity transfers—especially seizing market share from traditional chemical regions like Europe that are gradually exiting due to cost disadvantages.”
Simultaneously, China's vast domestic consumer market endows it with dual attributes as both the “world's factory” and the “world's market,” bolstering its confidence for expansion and resilience against risks.
“As supply-side structural reforms deepen and industry consolidation accelerates, leading enterprises are poised to further expand their market share during this cycle,” Sun Yan Yin stated. Conversely, numerous small and medium-sized chemical enterprises face immense survival pressures.
She anticipates that within the next two to three years, the industry may witness a wave of closures, bankruptcies, or acquisitions. “In many segments still dominated by economies of scale, SMEs are at a disadvantage in terms of capital chains, cost control, and risk resilience.”
Downstream, the growth drivers of the chemical market are also shifting. Sun Yan Yin pointed out that beyond the highly scrutinized new energy and electric vehicle sectors, China's rapidly emerging high-end manufacturing industries—such as artificial intelligence, robotics, and semiconductors—are creating substantial, high-value-added demand for new chemical materials.
Furthermore, interpreting the Ministry of Industry and Information Technology's directive to “curb excessive competition and foster emerging industries” in its 2026 work plan, Sun Yan Yin explained that for the chemical sector, the “anti-involution” policy aims to curb low-level redundant construction in certain traditional fields and may raise approval thresholds for new projects in industries with overcapacity. Simultaneously, the policy explicitly encourages enterprises to focus on high-end, high-value-added sectors and critical “chokepoint” technologies vital to supply chain security.
From a global perspective, China's “counter-cyclical expansion” is profoundly reshaping industrial landscapes. Sun Yan Yin analyzed that a clear trend of “East rising, West declining” is evident in global chemical production capacity. Europe's share of global chemical output continues to shrink, while the United States maintains its dominance through resource and technological advantages. China, however, is steadily increasing its global influence through dual expansion of both production capacity and market presence.
Emerging green trade rules, while creating long-term pressure, are also driving industrial upgrading. Sun noted that while measures like the EU Carbon Border Adjustment Mechanism (CBAM) currently have limited direct impact on Chinese chemical exports, they serve as a “barometer” that will prompt Chinese enterprises to accelerate actions in carbon management and green product lifecycle initiatives.
Looking toward 2026, Sun Yan Yin outlined four strategic directions for chemical enterprises to break through: 1. Drive “value elevation” by enhancing product value-added to boost competitiveness; 2. Focus on “service expansion” by extending from manufacturing to comprehensive solutions; 3. Accelerate “industrial globalization” through deepening global distribution networks and strengthening integration with local ecosystems; 4. Deepen “product circularity” by establishing green closed-loop systems and prioritizing circular economy development.
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