China has drawn up a set of guidelines aiming to reinforce the national petroleum and chemical industries in the recent period of economic turbulence, Guangzhou Daily reported on February 13.

The plan, which is now waiting for approval from the State Council, will be the sixth stimulus program carried out by the central government to revive flagging industries including steel, auto and textile, affected by the global financial crisis.

Petroleum and chemical company stocks listed in the yuan-dominated A-share market bounced when the news of a possible industrial rebound hit the domestic media’s headlines, the newspaper reported. According to the scheme, finalized in the past few days, the government plans to enhance the relevant industries’ competitive edge by supporting oil refining, ethylene production, and the manufacturing of refined chemical products like special fibers and engineering plastics.

The domestic petroleum and chemical industry has found itself in a bottleneck caused by overcapacity in high-energy consuming low-end products, making the industrial slide hard to reverse. According to the China Petroleum and Chemical Industry Association, unprofitable companies numbered 4,360 by the end of last November, accounting for 15 percent of the whole industry, and losses soared 606 percent year on year to 160 billion yuan (US$23.5 billion) in the first 11 months of 2008.

The government expects the development of high-value products to reduce the country’s reliance on overseas markets, from which organic silicon, polyester and engineering plastics are imported, and squeeze out inefficient manufacturers nationwide.

Yet the stimulus program, slated to be announced before the end of this month according to an anonymous industrial insider, involves no detailed measures for an industry currently affected by both a controversial special windfall tax levy and financial subsidies, the newspaper reported. Bai Yi, vice president of the China National Petroleum and Chemical Planning Institute, said the plan is simply an outline of the future development of these industries and contains no detailed policies to deal with the specific cases.

(China.org.cn by Wu Jin, February 16, 2009)