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China has unveiled a two-year strategy to stabilise growth in its petrochemical and chemical sector, setting an annual expansion target of more than 5% while tightening controls on new capacity and accelerating investment in advanced and low-carbon products.

The Work Plan for Stabilising Growth in the Petrochemical and Chemical Industry (2025–2026), released by the National Development and Reform Commission and the Ministry of Industry and Information Technology, highlights slowing domestic demand, margin pressure in bulk chemicals, and shortages in fine chemicals as major challenges.

A central element of the plan is capacity discipline in key petrochemical projects. New refining capacity will be strictly limited, while the scale and pace of ethylene and paraxylene additions are to be “scientifically regulated” to mitigate overcapacity. Coal-to-methanol is singled out as a high-risk segment, with tighter controls to avoid surplus output. Existing enterprises will receive policy support for upgrades, new technology demonstrations, and “refining-to-chemicals” conversions.

In the coal-chemical sector, Beijing will prioritise projects in regions with abundant coal, water, and environmental capacity, while promoting integration with new energy and advanced materials. Carbon capture, utilisation and storage (CCUS) is included as a requirement for future developments. The plan also calls for faster implementation of strategic resource projects such as helium extraction from natural gas and potassium recovery from seawater.

Beyond upstream controls, the policy channels resources into innovation and fine chemicals, including electronic chemicals, high-performance fibres, specialty rubbers, and membranes. Pilot production bases, application-testing platforms, and insurance schemes for first-batch products are expected to support commercialisation and diversify output away from bulk commodities.

The plan mandates relocation or upgrading of hazardous plants in urban areas by end-2025 and advances a digital and green transition through the “AI + Petrochemical” initiative, energy-saving retrofits, and VOC reduction in coatings and adhesives.

On the demand side, Beijing aims to strengthen linkages with construction, automotive, shipbuilding, and renewables, while expanding applications in bio-based materials and green methanol and ammonia fuels.

Internationally, the plan promotes cooperation under the Belt and Road Initiative and RCEP, backing overseas ventures in oil, gas, and potash, and encouraging foreign R&D centres in China. Financial support will include treasury bonds, differentiated credit, and streamlined approvals, alongside new monitoring tools such as an industry prosperity index and overcapacity early-warning system.

Written: Aiman Haikal 

Country
China