Analysis of the Development Trend
                   in the Chemical Market
                         Zhao An
The domestic chemical  market  remains  to  be  a  buyer's
market in 1998. Due  to  factors  such  as  the  financial
  crisis  in  Southeast  Asia,   the  inertia  of  economic
development and the lagged effect of macro regulation, the
growth speed of the macro economy in China  has  obviously
slowed down. The chemical production and  chemical  market
are still at an all-time low and there are  yet  no  signs
for significant improvement.
1. Brief overview of the chemical market in the first half
of this year
Due to the impact of various factors, the domestic  market
of production means remained soft in the first half of 1998.
Most of products were in short  demand.   The  sales  were
slack and prices went down.  The  features  of  a  buyer's
market became all the more prominent. In the first quarter
in particular, the growth of production,   product  price,
fixed assets investment and bank loan all slowed down, the
market was slack and signs of stagnation appeared. The oil
price in the international market dropped by a big  margin
to the lowest in the recent years, which  added  frost  to
snow in the domestic chemical market.
In such a macro environment, the demand  in  the  domestic
chemical market was soft and transactions were few.   Most
chemical products were in short demand and the prices slid
down by a big margin from a level which was  already  very
low. The growth of chemical production slowed  down,   the
product sales were slack, the production- marketing  ratio
dropped, the product  inventory  built  up  and  both  the
coverage and the amount of losses increased.
The domestic chemical market had the following features in
the first half of this year:
(1) Products were  in  short  demand  and  features  of  a
buyer's market were prominent.
After a stable development for many years, both production
capacity and  product  output  of  the  chemical  industry
greatly increased and the output of some products exceeded
the demand.  The  excessive  imports  and  smuggled  goods
impaired the product export and reduced the domestic demand.
There was a shortage of  demand  in  the  entire  chemical
market. Few varieties were in short supply and had a price
rise. There were problems of  over- supply  and  need  for
market development, and also problems  of  low  grade  and
  poor  quality  of  products  for  users'   requirements.
  Therefore   readjustment   of   product   structure   and
improvement of  product  grade  and  quality  were  urgent
matters needing an immediate solution.
  In the import and export of chemical products, the import
amount increased and the export amount reduced. (See Table
1 and Table 2) The situation made  it  more  difficult  to
ease the domestic chemical market.
The import in some products was over-concentrated  and  the
export in quite a number of products was reduced. The over
-supply  was  therefore  all  the  more  prominent  in  the
domestic chemical market which  already  lacked  effective
demand.
(2) There was a lack of effective demand and the  economic
pulling strength was weak.
Judging from the  analysis  of  the  economic  development
trend in the first half of this year, due to factors  such
as the inertia  of  early  stage  macro  regulation,   the
reduction of the fixed asset  investment  growth  and  the
  further  reform  in  enterprises  and   readjustment   of
industrial structure, the economic growth speed  obviously
slid down. The lack of effective demand  in  the  domestic
market led to the soft demand of chemical  products.   The
growth  of  chemical  production  slowed  down,   but  the
production-marketing ratio was still  low.   Although  the
state adopted measures to stimulate the market demand, the
effect failed to manifest itself in the first half of this
year. A quick demand expansion became an important  factor
stimulating the domestic chemical market.
(3) The price competition was fierce and the overall price
level was lowered.
  The shortage of demand, building-up inventory of products
, fierce competition and difficulty in  recovering  payment
made enterprises hard to sustain production. They  had  to
reduce product prices by a big  margin.   Prices  of  some
products were close to or even lower than  the  production
cost. The overall price level which was  already  low  was
further lowered. (See Table 3)
(4) The surrounding environment  was  not  stable  and  its
impact increased.
The financial crisis in Asia which had  started  last  year
was still present. The slackness of the  Japanese  economy
  and  the  depreciation  of  the  Japanese  currency,   in
particular, produced an adverse impact on the  economy  in
Asia and even the whole world. The massive price  drop  of
crude oil and oil products  in  the  international  market
this year brought a great pressure on the economy in China
, and the impact on the export was especially great. It can
be seen from Table 1 and Table 2 that the reduction margin
of the import volume was much higher  than  the&nbs