Read it in one article! China is the first to approve RCEP. How will the chemical industry be affected?

On March 22, the head of the International Department of the Ministry of Commerce stated that China has now completed the approval of the Regional Comprehensive Economic Partnership Agreement, which is the RCEP Agreement, and has become the first country to ratify the agreement

1.

(I.

On November 15, 2020, the "Regional Comprehensive Economic Partnership Agreement" (RCEP) was formally signed.

(2) Main highlights related to the petrochemical industry

1.

Tariff reduction

According to the official interpretation of the RCEP by the International Department of the Ministry of Commerce, more than 90% of the goods trade in the region will eventually achieve zero tariffs after the agreement takes effect.

As far as tariffs are concerned, RCEP and other existing trade agreements between members of the region have a mutually complementary and mutually reinforcing relationship

Prior to the signing of the RCEP, the current effective tariff rate of most products is inherently low, so the impact of this RCEP tax reduction will not be significant in the short term

Lower trade barriers

In addition to tariffs, RCEP uses various systems to reduce trade barriers within the region

2.

Adopt a negative list

After the RCEP takes effect, the fifteen member states have pledged to adopt the negative list approach to foreign investment, that is, outside the specific industries listed in the negative list, foreign investment activities will no longer be subject to additional approvals different from the domestic investment activities of the member states

Prohibit some performance requirements for foreign investment

Article 6 of Chapter 10 of RCEP stipulates that, unless the member states clearly enumerate the inapplicable items in Annex III, all aspects of foreign investors’ investment in the member states, such as establishment, acquisition, expansion, management, operation, operation, and sale Or other aspects, member states shall not impose or enforce the following measures: reaching a certain level or proportion of local content; transferring specific technologies, production processes or other know-how to persons in their territories; selling in specific markets; Intervention, etc.

Investment promotion and facilitation

According to the requirements of RCEP, member states should strive to promote and increase the recognition of the region as an investment region, for example, encourage investment among member parties, promote business matching activities, organize and support investment opportunities and investment laws, regulations and policies related Introductory meetings, and promote information exchange

2.

2.

1.

ASEAN

According to the trade information provided by ASEAN, chemical products have become important trade products between China and major ASEAN countries
.
China and ASEAN are highly complementary in the chemical industry
.
The products China imports from ASEAN are mainly primary raw material chemical products, such as primary form plastics, natural rubber and other chemical products
.
The chemical products imported from China by ASEAN countries are mainly fertilizers, plastics and rubber products, pesticides, ethanol, phosphoric acid and so on
.

In recent years, the demographic dividend of ASEAN countries has been continuously released, and the demand for petrochemical products has increased
.
In order to meet demand, Southeast Asian countries represented by Singapore are rapidly converging into new refining and chemical production centers.
Malaysia, Indonesia, the Philippines, Vietnam and Thailand are also strengthening their refining and chemical processing capabilities.
At the same time, China is also in southern China, such as Guangxi is actively deploying a large-scale petrochemical industry base for the ASEAN market
.

Korea

South Korea is a strong country in the export-oriented petrochemical industry.
Its oil refining and chemical industries are highly developed.
Its export products account for a relatively high proportion of the industry's total production.
It is one of Asia's largest exporters of petroleum products
.
Its petrochemical industry is mainly dominated by large domestic Korean conglomerates and has strong competitiveness
.
For naphtha, light cycle oil, etc.
, China mainly imports, and the main source country is South Korea
.

Japan

The import and export of chemical products between Japan and China are highly complementary
.
China’s imports of chemical products from Japan are mainly high-end refining and chemical products, of which high-performance chemical products such as carbon fiber have the largest increase, while the largest proportion of Japanese chemical products imported from China are basic chemical products such as plastics
.
It is stronger than China in terms of high-end refining and fine chemicals capabilities
.

Because Japan’s domestic consumption of crude oil has been declining year by year, in recent years, its refining industry has focused on product exports as the main growth point.
However, in recent years, China’s improvement in petroleum refining capacity and the increase in its ability to export high-tech petrochemical products have also made Japan Feel the pressure of competition
.
In 2020, Sinopec exported PVA to Japan for the first time to break the local monopoly, which is also a favorable proof of Sinopec's product production technology improvement
.

Australia

Taking the 2019 data provided by OP Data as an example, Australia's main export products to China are mineral products mainly made of metal ore, and the export volume of textiles and raw materials related to the petrochemical industry ranks third with a rapid growth
.
Australia's main imports from China are mechanical and electrical products, textiles, furniture and toys, and other miscellaneous products, but plastic and rubber products are also a major category of imports, accounting for about 5% of total imports in 2019
.

new Zealand

Take the 2018 data provided by the Foresight Industry Research Institute as an example.
New Zealand’s exports of Chinese chemical products accounted for a relatively small proportion
.
In terms of imports, mainly textiles and raw materials, furniture, toys and miscellaneous products, plastics and rubber also accounted for a certain proportion .

2.
Forecast of the overall impact of RCEP on China's petrochemical industry after its entry into force

Taking into account the influence of the existing free trade agreements between China and RCEP member states, some scholars have predicted the cumulative impact percentage of RCEP on specific industries in China during the "14th Five-Year Plan" period based on the Global Trade Analysis Model (GTAP) and related data research.

.
Among them, the domestic output of the petrochemical industry (mainly including coking products, petroleum, refined oil, etc.
, basic chemicals, other chemicals, rubber and plastic products) will be suppressed, with an impact ratio of -0.
11%.
At the same time, product imports and exports are expected to be Received 2.
92% and 1.
75% respectively
.

Based on the above data, it is not difficult to see that although RCEP has a positive impact on the import and export of products in the petrochemical industry, the promotion of exports is weaker than the promotion of imports
.
At the same time, domestic output will be suppressed to some extent in the next few years
.
We speculate that the main reasons for the above data are the following two aspects: On the one hand, the main domestic production products are the production of low-tech petrochemical products.
Such products are highly substitutable and face the rising ASEAN countries in the next few years.
The petrochemical industry will be affected to a certain extent; on the other hand, domestic companies still lack the production technology and production capacity of high-tech additional products.
In addition, the main impact of RCEP on the current trade situation comes from Japan and South Korea, and Japan and South Korea have high exports.
Technical content petrochemical products are good at
.
Therefore, in the next few years, the domestic petrochemical industry will face a more intense competitive environment
.

(2) Impact on key species that may be affected

1.
Petroleum products

According to statistics provided by Longzhong Information, after the RCEP takes effect, the major products that may be affected more are light cycle oil, base oil, bitumen and petroleum coke, while the less affected varieties are mainly crude oil, gasoline, diesel, and petroleum coke.
Jet fuel, ship fuel, LNG and LPG
.

For example, for base oils, since South Korea and Singapore accounted for 70% of total imports, and there were import tariffs between South Korea and Singapore before, after the implementation of RCEP, the reduction of import tariffs will increase the supply of domestic imported base oils and reduce prices.
It may also have a certain impact on the supply and operation of domestic base oil
.
For petroleum coke, due to lack of technology, China has a large demand for needle-shaped petroleum coke imports.
The largest source of imports is South Korea.
The reduction of import tariffs will increase the import supply
.
For light cycle oil, it is a product that China is 100% dependent on imports.
Because of the previous import tariffs on South Korea and Japan, and South Korea is China’s main importing country, this product may increase domestic supply, decrease prices, and benefit downstream related products.
Short-term effects of exports
.
However, for products such as crude oil, gasoline, diesel, and jet fuel, since zero tariffs have been implemented between countries before the RCEP takes effect, the impact of tariff reductions on these types of products is relatively low
.

2.
Chemical products

2.
Chemical products

According to the statistics of Yu Biying, a professor at Beijing Institute of Technology, the effects of RCEP on the chemical industry after its entry into force can be summarized in two points.
One is that the positive impact of tariff trade from Japan and South Korea is beneficial to the import and export trade of the chemical industry because of the tariffs of RCEP in the chemical product industry.
Compared with the China-Korea Free Trade Agreement, the reduction or exemption is greater, and China and Japan have reached an agreement on mutual tariff reduction and exemption for related chemical products for the first time
.
The second is that China has adopted a relatively conservative tariff policy for chemical products with a high degree of foreign dependence, which will slow the rapid increase in foreign dependence to a certain extent
.
For example, for olefins, China only reduced taxes to zero for Japan and South Korea in the 21st and 10th years of the agreement’s entry into force; for polyethylene, p-xylene (PX), purified terephthalic acid (PTA), and ethylene two For chemicals such as alcohol, China has not made any commitments to reduce or cancel tariffs for major trading countries such as Japan and South Korea.
For Australia, it has adopted a longer tax cut period or slightly reduced its tax rate and remained unchanged
.

According to the statistics of Yu Biying, a professor at Beijing Institute of Technology, the effects of RCEP on the chemical industry after its entry into force can be summarized in two points.
One is that the positive impact of tariff trade from Japan and South Korea is beneficial to the import and export trade of the chemical industry because of the tariffs of RCEP in the chemical product industry.
Compared with the China-Korea Free Trade Agreement, the reduction or exemption is greater, and China and Japan have reached an agreement on mutual tariff reduction and exemption for related chemical products for the first time
.
The second is that China has adopted a relatively conservative tariff policy for chemical products with a high degree of foreign dependence, which will slow the rapid increase in foreign dependence to a certain extent
.
For example, for olefins, China only reduced taxes to zero for Japan and South Korea in the 21st and 10th years of the agreement’s entry into force; for polyethylene, p-xylene (PX), purified terephthalic acid (PTA), and ethylene two For chemicals such as alcohol, China has not made any commitments to reduce or cancel tariffs for major trading countries such as Japan and South Korea.
For Australia, it has adopted a longer tax cut period or slightly reduced its tax rate and remained unchanged
.

In addition, it will have different effects on key domestic products
.
For example, polyethylene has a large gap and a certain degree of import dependence.
Taking the data from January to September 2020 provided by Jinlianchuang as an example, the total import ratio to South Korea, Singapore, Thailand, Malaysia, Indonesia, and Japan is as high as 27%.

.
Due to South Korea’s superior geographical location, China’s imports of polyethylene products from South Korea are expected to increase, and ASEAN countries will increase their polyethylene production capacity in the future.
The entry into force of the agreement will also stimulate the exports of these countries to China
.
For aromatic hydrocarbons, taking styrene as an example, China has a high degree of dependence on imports from RCEP member countries such as South Korea, Japan, Singapore, and Brunei.
Taking the data provided by Jinlianchuang from January to September 2020 as an example, Japan ranks No.
One accounts for 14% of total imports
.
After the RCEP takes effect, the tariff reduction will greatly reduce the cost price, but it will also increase the degree of external dependence in the short term, which will have an impact on domestic related production enterprises
.

In addition, it will have different effects on key domestic products
.
For example, polyethylene has a large gap and a certain degree of import dependence.
Taking the data from January to September 2020 provided by Jinlianchuang as an example, the total import ratio to South Korea, Singapore, Thailand, Malaysia, Indonesia, and Japan is as high as 27%.

.
Due to South Korea’s superior geographical location, China’s imports of polyethylene products from South Korea are expected to increase, and ASEAN countries will increase their polyethylene production capacity in the future.
The entry into force of the agreement will also stimulate the exports of these countries to China
.
For aromatic hydrocarbons, taking styrene as an example, China has a high degree of dependence on imports from RCEP member countries such as South Korea, Japan, Singapore, and Brunei.
Taking the data provided by Jinlianchuang from January to September 2020 as an example, Japan ranks No.
One accounts for 14% of total imports
.
After the RCEP takes effect, the tariff reduction will greatly reduce the cost price, but it will also increase the degree of external dependence in the short term, which will have an impact on domestic related production enterprises
.

3.
Development suggestions and proposed research policies under the new regulations

(1) RCEP's impact on the petrochemical industry

1.
From an investment perspective, the beneficial effects of the lower investment thresholds of each member country

Domestically, because domestic foreign investment has already adopted the negative list access model, and the petrochemical industry related industries are generally not included in the negative list, from the perspective of foreign investment restrictions, the entry into force of RCEP has no obvious impact on foreign investment in the petrochemical industry.
In addition, the further optimization of the domestic business environment will attract more foreign investment and strengthen the ability of companies with high-end intellectual property rights to enter the country to engage in high-end manufacturing, which is conducive to enriching the high-end industrial chain
.

In terms of foreign investment, the lowering of investment thresholds in Southeast Asian countries and the improvement of the business environment will help petrochemical companies to go out and expand overseas markets
.

2.
Adverse effects on the domestic industrial chain

Although China's labor-intensive industry products or mid-to-high-end product exports will be boosted in the short term, on the one hand, due to the year-on-year increase in domestic labor costs, the textile, light industrial building materials, toys, and daily chemical products that are closely related to the petrochemical industry The manufacturing side will further flow out of China and turn to ASEAN countries
.
This is a necessary stage for the transformation and upgrading of domestic industries, but the release of the impact in the short term may cause social problems such as unemployment
.

But on the other hand, because some industries are transferred to avoid trade barriers, after the RCEP takes effect, the accumulation of rules of origin and the use of new technologies to promote customs facilitation have eliminated trade inconvenience to a certain extent, and can reduce the industry from the side.
The risk of chain transfer
.

3.
The beneficial impact of lowering trade barriers on the domestic petrochemical industry

The petrochemical industry has a long-standing structural contradiction of low-end surplus and high-end shortage.
As the world's largest chemical producer, China is facing challenges such as resource competitiveness and overcapacity.
Midstream industries such as the refining and chemical industry are faced with high-priced inventory in the early stage, and their products have no way out.
Unobstructed problems
.
The implementation of RCEP can lower the export barriers of the petrochemical industry and ease the situation of excess resources to a certain extent
.

The reduction of tariffs on imported petrochemical raw materials, such as naphtha and light cycle oil, will reduce the production costs of domestic companies and promote the export of downstream products companies
.

4.
Adverse effects on the domestic petrochemical industry

Domestic high-end refining and chemical products, fine chemical products, etc.
, such as semiconductor materials, panel materials, and solar cell materials, are relatively scarce.
Domestic companies lack competitiveness in the face of Japanese and Korean companies with mature technologies
.
The entry into force of RCEP will have an impact on domestic enterprises that have been striving to upgrade their industries to high-end products in recent years
.

Increasing the domestic market’s reliance on imported products and technologies is not conducive to technological innovation and industry stability and safety
.
If the price of imported high-tech petrochemical products is further reduced and the domestic market share is seized, the road of independent technological innovation of domestic enterprises will be hindered
.
Against the background of rising international trade protectionism and increasing trade frictions, excessive reliance on foreign products and technologies from a single country will endanger the stability and safety of the petrochemical industry
.