Broader horizons for chemical companies going global

Although China has become the world's second-largest economy, it has achieved few impressive results in overseas capital export, overseas investment and factory construction, or the establishment of well-known overseas brands. It is particularly noteworthy that, compared to the long-term trade surplus in China's overall foreign trade, the chemical import and export trade has been in deficit for many years, clearly demonstrating the industry's weak position. To fundamentally reverse this passive situation, the chemical industry should muster its courage and build confidence, especially a group of advantageous enterprises that should take the lead in implementing the "going global" strategy, seeking development overseas, thereby achieving internal and external interaction and building a world-leading chemical power.

　　In the opinion of this author, for chemical enterprises with large export shares and foreign trade companies with strong capital strength, given the current global economic downturn, falling asset prices, and the continuous appreciation of the RMB, actively implementing a "going global" strategy and seizing opportunities to build factories and develop businesses overseas is timely and significant.

　　First, the appreciation of the domestic currency significantly improves investment efficiency and success rate. In recent years, the RMB exchange rate against the US dollar has repeatedly hit new highs, meaning that the same amount of RMB has increased purchasing power in the international market. Under this background, whether it is overseas investment and factory construction or mergers and acquisitions, it can save a lot of investment costs and improve investment efficiency. Currently, the aftereffects of the financial crisis have not yet subsided, and the impact of the European debt crisis is still spreading, leading to stagnation or regression in the economies of some countries. Investing and building factories in these countries at this time will not only increase employment opportunities but also increase local taxes, making it easier to obtain government support, and the success rate of factory construction naturally increases.

　　Second, it can alleviate the pressure of domestic overcapacity. Currently, domestic chemical production capacity has entered a stage of structural overcapacity, with loss-making operations and competitive price reductions for exports becoming commonplace. The result of internal friction and infighting is the sacrifice of industry interests, while overseas companies benefit. Investing and building factories abroad can reduce the supply of similar products in the domestic market, alleviate the supply-demand contradiction, and help improve the operating quality of existing enterprises. At the same time, given the long-term upward trend of international crude oil prices, shipping costs will inevitably rise. Overseas factory construction avoids long-distance transportation, and on-site production and consumption can not only increase the unit gross profit of products but also allow local consumers to obtain high-quality and inexpensive products.

　　Third, it can effectively avoid trade barriers. In recent years, products exported from China, such as rubber tires, phosphates, glyphosate, and polysilicon, have frequently encountered "anti-dumping" and "countervailing" investigations from importing countries, seriously affecting the reputation of China's chemical industry in overseas markets and causing relevant enterprises to spend excessive time and money on litigation. Overseas direct factory construction, local procurement of raw materials, and local sales effectively avoid trade barriers.

　　Finally, it is conducive to improving the trade structure and enhancing the overall quality of enterprises. The main reason for the large deficit in China's chemical foreign trade is that exports are mainly low-tech, low-value-added primary products, while imports are mainly high-value-added new materials. At the same time, multinational corporations also increase huge investments in China every year. Therefore, if some advantageous projects are deployed overseas, it will offset some of the trade deficit and improve the overall situation of chemical foreign trade. In addition, overseas factory construction directly participates in the international economic cycle, and all business activities must be carried out in accordance with international trade practices, so it is easier to introduce advanced management methods and quickly improve its comprehensive management level.