Chemical Fiber Industry: Present Status and Measures

1. Review of the development of the chemical fiber industry
during 2001-2005

    (1) Major achievements made in the development of the
chemical fiber industry

(i) Rapid growth of capacity and output

China's production capacity of chemical fibers increased
sharply from 7.4 million t/a in 2000 to 19.3 million t/a in 2005
with an average annual growth of 21.1%. The output of chemical
fibers increased from 6.940 million tons in 2000 to 16.290
million tons in 2005 with an average annual growth of 18.6%. The
imported amount was maintained at a high level with an average
of over 1.5 million tons a year. The export of chemical fibers
grew considerably from only 100 thousand tons in 2000 to 710
thousand tons in 2005. The apparent consumption of chemical
fibers increased from 8.492 million tons in 2000 to 17.10 million
tons in 2005 with an average annual growth of 15%.

(ii) Drastic development of the polyester fiber sector, the
largest chemical fiber segment

The capacity for polyester production in China increased from
5.95 million t/a at the end of 2000 to 20.57 million t/a at the
end of 2005 with an average annual growth of 28.2%. China' share
of global capacity increased from 17.6% at the end of 2000 to
38.9% at the end of 2005. The output of polyester increased from
5.266 million tons in 2000 to 13.853 million tons in 2005 with
an average annual growth of 21.3%. The output of polyester fiber
increased from 5.126 million tons in 2000 to 12.701 million tons
in 2005 with an average annual growth of 19.9%. Polyester fiber
represented 73.5% of the total chemical fiber output in 2000,
increasing to 78% in 2005.
   The rapid development of the polyester sector was also
reflected in non-fiber products. The output of polyester bottle
chip increased from 360 thousand tons in 2000 to 1.9 million tons
in 2005. The net exported amount of polyester bottle chip reached
500 thousand tons in 2005. The output of polyester film increased
from 880 thousand tons in 2000 to 350 thousand tons in 2005.
Production of polyester for use in non-fiber products started
rather late in China. Drastic growth during the Tenth Five-year
Plan period (2001-2005), however, supported the rapid
development of related sectors such as the beverage sector and
the packaging sector.

(iii) Remarkable concentration of the chemical fiber industry

The chemical fiber industry in China is increasingly mainly
distributed in coastal areas such as Zhejiang province, Jiangsu
province, Shandong province, Fujian province, Shanghai and
Guangdong province. The proportion of China's chemical fiber
output coming from these 6 regions increased from 75.4% in 2000
to 84.8% in 2005. The development of the chemical fiber industry
in Zhejiang and Jiangsu provinces was the most rapid. The average
annual growth of the chemical fiber output during 2000-2005
reached 32.9% in Zhejiang province and 19.2% in Jiangsu province.
The total output increase in China during 2000-2005 was 9.2955
million tons, with Zhejiang province accounting for 53.9% and
Jiangsu province accounting for 28.8% - together totaling 82.7%.
The concentration of the chemical fiber industry has resulted
in a highly concentrated specialized production and market
system. It has helped promote product innovation, efficiency
upgrades and cost reductions. Advantages in regional
competition in the chemical fiber industry are therefore well
established.

(iv) Rapid emergence of the private economy

The most outstanding feature in the development of the chemical
fiber industry in China during the Tenth Five-year Plan period
(2001-2005) was the development and emergence of the private
chemical fiber economy. Owing to the successful development of
localized chemical fiber technologies and equipment, private
enterprises came into the chemical fiber industry in a big way.
By the end of 2005, the capacity of chemical fibers in private
enterprises accounted for 66.74% of the national total, an
increase of 24.33 percentage points over the end of 2001. The
proportion for state-owned and state-controlled enterprises was
27.40%, a drop of 20.27 percentage points from the end of 2001.
In the total capacity increase of 11.9 million t/a during
2000-2005, private enterprises accounted for 87.7%, state-owned
and state-controlled enterprises only accounted for 9.94% and
foreign-owned and joint venture enterprises accounted for
2.36%.
   Private enterprises use advanced technologies developed by
China itself or introduced from abroad. They have made rapid
capacity expansion, established flexible management systems,
implemented high-effect operating mechanisms and gained
considerable successes in market competition. A great portion
of private enterprises has reached the world-class production
scale.

(v) Major advances in technical progress and drastic upgrading
in localized capacity

The successful development of localized technologies and
equipment greatly raised the technical level and enhanced
competitiveness in the chemical fiber industry and constituted
an important driving force for the rapid development of the
industry during the Tenth Five-year Plan period (2001-2005). The
localization rate of chemical fiber equipment in China is around
87% today and dependence on imported chemical fiber equipment
has been thoroughly changed.

    (2) Major problems in the chemical fiber industry in China

(i) Unbalanced development of industrial chains and huge supply
deficit of raw materials

The rapid development of the chemical fiber industry and the
lagging development of chemical fiber raw materials in China
have led to non-coordinated development of industrial chains and
import dependence upon chemical fiber raw materials. The total
apparent consumption of the four major chemical fiber raw
materials, PTA (purified terephthalic acid), MEG (mono ethylene
glycol), CPL (caprolactam) and AN (acrylonitrile) was around
19.14 million tons in 2005 and the total imported amount was
around 11.30 million tons, or accounting for 59%.

(ii) Surplus capacity and reduction of operating rate

China's chemical fiber production capacity has grown faster than
domestic demand in recent years. The capacity for some chemical
fibers is therefore in surplus and the operating rate has been
constantly reduced. Take polyester fiber for instance. Due to
the sustained drastic capacity increase during 2004-2005, the
operating rate of polyester units was reduced to 82.7% in 2004
and 74.2% in 2005, a drop of 9.7 percentage points and 8.5%
percentage points from the previous year. The surplus capacity
of polyester reached 4.44 million t/a in 2004, accounting for
27.5% of the total. The surplus capacity of polyester further
increased to 6.72 million t/a in 2005, accounting for 32.7% of
the total. The operating rate of polyester filament fiber units
was maintained at a low level of around 60% in 2004 and 2005 and
the surplus capacity was 5.50 million t/a in 2005, accounting
for 41% of the total. The operating rate of polyester staple
fiber units was 76.0% in 2004 and 69.2% in 2005, a drop of 10.2
percentage points and 6.8 percentage points from the previous
year and the surplus capacity was 3.0 million tons in 2005,
accounting for 38% of the total.

(iii) Pressure of competition and downslide of economic
performance

The unduly rapid capacity expansion