THOUGHTS

Gaining Profitable Growth in China’s Chemical Market: Imperatives for International Chemical Companies

Dec 4, 2019

China’s chemical industry overview: What’s instore for chemical companies

Although the economic expansion in China has slowed down over the past few years, it still remains a key growth market for most global chemical companies. Industry experts believe that over the next decade, China will continue to be one of the major importers of commodity chemicals. Furthermore, international chemical companies have advanced and more sophisticated products that can support the further stages of China’s economic development.

However, international companies in China’s chemical sector have new challenges coming their way. Companies in China are increasingly moving out of low-profit commodity segments towards more sophisticated sectors. They are also enjoying several home-player advantages in the highly competitive market. In this article, chemical industry experts at Infiniti Research provide an outline of the moves that international chemical companies must make in order to continue capturing profitable growth opportunities in China’s chemical market. International chemical companies that want to create a place for themselves in China’s chemical market must align their products and business models with China’s evolving needs, learn how to access the shifting demand, and strategize to expand and strengthen their base in this market.

Chemical companies

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 Adapt to the market’s changing needs

There will be a continued demand growth for chemicals in China. But the areas of opportunity in the country’s chemical market appear to be increasingly nuanced, due to which chemical companies must take measures to adapt and align their strategies accordingly. One approach to achieve this is by focusing on the company’s products that match up with China’s chemical industry needs and what the Chinese state is promoting.

The chemical industry is a catalyst to promote growth in various strategic industries such as electric vehicles, new energy technologies, and civil aviation that the Chinese government wants to nurture growth globally. As such, this opens new windows of opportunity for international chemical companies to become China’s trusted partners in native innovations in industries that have government backing. International players can also work closely with government bodies in China to form product specifications based on the changing standards or rules in the region. This could prove to be a new growth driver for chemical companies.

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Manage stakeholders within chemical companies

Chemical companies that want to sustain and grow their business in China’s chemical market must work and maintain positive relations with several stakeholders. This includes stakeholders across the country’s business and regulatory landscape. New plant launches and product approvals especially in regulated product categories require comprehensive rounds of approval from government authorities as well as state-run research institutions. Therefore, it is vital for international companies to ensure proactive stakeholder management. Successful companies are even going to the extent of hiring government-affairs teams to identify the key stakeholders in all areas that are related to their business operations in China. These teams understand stakeholder concerns and work on ways to address them in time so that hindrances to the company’s project can be avoided.

Choosing the right distribution partners

Businesses in China are generally heavily relationship-driven. As a result, it is vital for international chemical companies to have a local presence especially in new markets and business verticals. To gain a better foothold in China, chemical companies must focus on building a distribution partner network through which they can get to customers with ease and provide unique offerings in the highly competitive marketplace. Having the right distribution partners are critical as relationships, dependability and ethics vary sharply among different players in the market.

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