Beibu Gulf Describes Development Blueprint

The National Development and Reform Commission (NDRC) recently
characterized the investment developments of this year's first
two months as "rapid, stable and moderate." China's investment
in these two months totaled RMB653.5 billion, a yearly growth
of 23.4%, compared with 24.5% in the same period of 2006. The
investment used in new construction projects grew by 14.6%,
revealing an improved trend welcomed by NDRC. In recent years,
the price growth of materials used in industrial production has
always been higher than that of materials used in living,
indicating that the high growth of China's economy has relied
more on investment than on consumption, according to some
economists. China's GDP growth is expected to be around 10% for
the year 2007, as projected by Asian Development Bank. An
official of the National Bureau of Statistics of China proposed
that 8% GDP growth is suitable for China in 2007.
    On April 10th, China's stock index hit a historical high
again, with an increase of 14% in only three weeks (since March
20th). The total market cap of the local stock market reached
RMB13 000 billion, which accounted for 17% of the total financial
assets possessed by citizens. The total market cap of chemical
companies contributed to nearly 10% of the total.
   07 Bo' Ao International Advanced Materials Forum, jointly
held by Hainan Provincial Government, ChemChina, HSBC and
DECHEMA, closed in Hainan province on March 30th. More than 270
attendees from BASF, Dupont, Bayer, Degussa, Toray, Wacker,
Sinopec, CNPC, CNOOC, ChemChina and other petrochemical
companies joined in the conference to discuss the development
prospectus of advanced chemical materials and demonstrate real
interest in joining in the construction of Beibu Gulf oil and
gas chemical region.
    "Both the sustainable increasing trend of China's economy
and the great consumption prospects of chemical advanced
materials in China make foreign companies be interested in
placing China as the key for their industrial plan and future
development,"  Zhang Guobao, an official of NDRC, said to the
delegates in the Forum. "Yet, China's advanced materials
industry is poorly developed. The application of advanced
materials in engineering goes far behind the research, with a
low scale of commercial production."
    In the forum, Hainan provincial government revealed that the
province located in south China sea will emphasize developing
the crude oil and natural gas chemical industry. The total
production value of Hainan's crude oil/natural gas chemical
industry reached RMB12 billion in 2006, and is going to triple
to RMB36 billion in 2007. A schedule of constructing
polypropylene, styrene monomer, ethylene, PX and PTA projects
is on the desk of the provincial government.
    At the northern flank of Beibu Gulf, CNPC started to
construct its RMB15.3 billion refinery in Qinzhou, Guangxi;
Sinopec Group has expanded its Zhanjiang Dongxing Refinery from
2 million t/a to 5 million t/a; CNOOC is constructing its 3
million t/a modified asphalt project in Zhanjiang.
    However, environmental experts warned that governments
intend to supervise the collective impact of developing the
oil/gas chemical industry on the environment of Beibu Gulf and
avoid competition of redundant projects.
    Apparently meeting the requirements of China's two most
powerful policy setting organizations, which recently closed
their annual conferences, Beijing increased the price of natural
gas by RMB0.15 per cubic meter to RMB2.05 per cubic meter,
effective April 1st. A nationwide price increase for LNG is
proposed in a report recently submitted to NDRC by CNPC, Sinopec
Group and CNOOC. The public media are increasingly drawing
attention to the monopoly of energy giants in petroleum, power,
coal industry.

Zhong Weike
April 10th, 2007