According to the deployment of the Central Economic Work Conference on "seeking progress while maintaining stability, promoting stability through progress, and establishing first and then breaking through", the theme of this year's report is: promoting stability through progress, stability and progress are complementary, mutually conditional, and mutually reinforcing; Stability is the main tone and the overall situation, progress is the direction and driving force. Without stability, it is impossible to advance, and without progress, it is difficult to stabilize. Therefore, in the new year, the petrochemical industry should "promote stability through progress", strive for progress under the premise of stability, and promote various key work to a new level. Just now, Comrade Fan Min, Deputy Director of the Information and Marketing Department of the Petrochemical Federation, introduced to you the economic operation of the petrochemical industry in 2023 based on statistical data from the National Bureau of Statistics. Based on an in-depth analysis of the industry's operation in 2023, I will provide a few suggestions on the economic situation and work priorities for 2024, for your reference in your work:
1、 Basic situation and analysis of the economic operation of the petrochemical industry in 2023
In 2023, the century long changes are accelerating, global economic recovery is weak, industrial and supply chain restructuring is accelerating, major power games and regional turbulence are intensifying, and the complexity, severity, and uncertainty of the external environment are increasing. From the perspective of the international political environment, 2023 is a complex and ever-changing year, as well as a year of increasing uncertainty. The world economy is moving forward even more difficultly, and its recovery after the epidemic is less than expected. Due to the deep impact of the Russia-Ukraine conflict, the European Union, the most stable economy in the past, has high energy prices and high inflation. In addition, the US dollar continues to raise interest rates. The prices of bulk commodities and major products continue to decline, and the world economic growth has gone through another year of decline.
The year 2023 will be the first year for China to fully implement the spirit of the 20th National Congress of the Communist Party of China, and the year of economic recovery and development after three years of transition from the prevention and control of the COVID-19 epidemic. The total economic volume will exceed 126 trillion yuan, with a year-on-year growth of 5.2%. The increase in US dollars will be 793.2 billion dollars, which is equivalent to the country ranking 20th in the world GDP. China remains the largest engine of global economic growth, and high-quality development has been solidly promoted. Significant progress has been made in the construction of a modern industrial system, new breakthroughs have been made in scientific and technological innovation, reform and opening up have been deepened, the foundation for safe development has been consolidated and consolidated, and solid steps have been taken to comprehensively build a socialist modernized country.
Basic situation of economic operation in the petrochemical industry in 2023
According to data from the National Bureau of Statistics, the petrochemical industry achieved a revenue of 15.95 trillion yuan in 2023, a year-on-year decrease of 1.1%; The total profit was 873.36 billion yuan, a year-on-year decrease of 20.7%; The total import and export volume was 952.27 billion US dollars, a year-on-year decrease of 9.0%.
The situation of the three major sectors is that the oil and gas sector achieved a revenue of 1.44 trillion yuan, a year-on-year decrease of 3.9%; Realized a profit of 301.03 billion yuan, a year-on-year decrease of 15.5%. The refining sector achieved a revenue of 4.96 trillion yuan, a year-on-year increase of 2.1%; Realized a profit of 65.6 billion yuan, a year-on-year increase of 192.3%. The chemical industry sector achieved a revenue of 9.27 trillion yuan, a year-on-year decrease of 2.7%; Realized a profit of 486.26 billion yuan, a year-on-year decrease of 31.2%.
Analysis of the reasons for the synchronous decline in economic data in 2023
From the above data, it can be seen that the operating performance in 2023 was not ideal, and the industry's operating revenue, profit, and import and export volume decreased synchronously. Among the three major sectors, the refining sector saw both revenue and profit growth due to its low base in 2022. The operating revenue and profit of the oil and gas and chemical sectors have both decreased, which is related to the high base of the two sectors in 2022. The main reason is that the prices of crude oil, natural gas, and the vast majority of chemical products have decreased significantly.
One is a decrease in prices. In 2023, the ex factory prices of the oil and gas extraction industry decreased by 10.2% year-on-year, while the ex factory prices of chemical raw materials and products decreased by 9% year-on-year.
The prices of key monitored inorganic and organic chemicals have both decreased year-on-year and month on month throughout the year, and the majority of months have seen a decrease of over 50%! According to statistics, the average price of Brent crude oil in 2023 was 82.6 US dollars per barrel, a year-on-year decrease of 18.3%.
The second reason is that the decrease in price leads to an increase in output and apparent consumption, resulting in a decrease in efficiency. It is precisely because the prices of crude oil, natural gas, and the vast majority of petrochemical products have experienced a significant decline, resulting in a situation of "increasing production, increasing consumption, and not increasing profits" in the petrochemical industry in 2023. In 2023, the crude oil processing volume was 735 million tons, a year-on-year increase of 9.3%, and the apparent consumption volume was 770 million tons, a year-on-year increase of 8.5%. Both the crude oil processing volume and apparent consumption volume reached historical highs.
The above only lists the main products and varieties with significant growth. If we look at the types of petrochemical products listed by the National Bureau of Statistics, their production and apparent consumption are almost all positive.
However, looking at the benefits of various sectors and sub sectors, the situation is exactly the opposite. Except for refining, coatings, inks, industrial pigments, synthetic rubber, rubber products, and specialized equipment manufacturing, these few sectors and sub sectors have seen positive growth in benefits, while the benefits of other sectors and sub sectors have decreased year-on-year.
The total profit of the petrochemical industry decreased by 20.7%, the oil and gas extraction sector decreased by 15.5%, and the chemical sector decreased by 31.2%. Among them, the basic chemical industry decreased by 50.6%, the fertilizer industry decreased by 29.2%, the pesticide industry decreased by 62.2%, the synthetic materials industry decreased by 21.7%, and the specialized chemical industry decreased by 14%. It can be seen that the situation of "increasing production and consumption without increasing profits" is severe.
The third reason is that the decrease in prices leads to an increase in import and export volume and a decrease in import and export value. When people see a 9% decrease in the total import and export volume, a 7.9% decrease in import value, and an 11.2% decrease in export value of the petrochemical industry in 2023, their first reaction is that the international environment is severe, the game between major powers and market competition is intensifying, regional turbulence and uncertainty factors are constantly increasing, coupled with the regionalization and fragmentation of the industrial chain and supply chain. These are the current situation and indisputable facts.
However, the main reason for the synchronous decline in the total import and export volume, import value, and export value of the petrochemical industry in 2023 is still product prices. The data tells us that it is not because of the severe international environment that products cannot be exported, nor is it because of the restructuring of the industrial and supply chains that our export volume has decreased. Instead, there has been a situation of "quantity increase and price decrease" in the context of an increase in the export and import volume of major petrochemical products.
The above data indicates that while both import and export volumes have increased, import and export volumes, as well as the total import and export volume of foreign trade, have decreased synchronously. The American Chemical Council predicts that the export value of chemical products in the United States will decrease by 7.5% and the import value will decrease by 10.5% in 2023. The decrease in foreign trade import and export volume is mainly due to product prices, rather than any other reasons.
3. Make new contributions to ensuring national energy security
Energy and petrochemical enterprises such as PetroChina, Sinopec, CNOOC, and Yanchang Petroleum have implemented the deployment of the Party Central Committee's "energy revolution", steadfastly implemented resource strategies, continuously increased the efforts of the "Seven Year Action Plan for Increasing Storage and Increasing Production", highlighted the exploration and development of oil and gas resources, while continuously innovating and stabilizing old oil fields. At the same time, they attach equal importance to both land and sea, as well as conventional and unconventional oil and gas resources. They have also increased their efforts in exploring and developing deep-sea, western, and shale oil and gas resources, and continuously made new breakthroughs in newly discovered geological reserves, laying a solid foundation for ensuring national energy security.
In 2023, crude oil production reached 209 million tons, a year-on-year increase of 2%. This is a new leap achieved after returning to the 200 million ton platform after a six-year hiatus in 2022. The natural gas production reached a record high of 229.71 billion cubic meters, achieving a remarkable performance of increasing by over 10 billion cubic meters for seven consecutive years.
The energy backbone enterprises in the petrochemical industry play a major role. The majority of cadres and workers have worked hard to overcome many adverse factors, such as the wide fluctuation of international oil prices, the risk of spillover from the Russia-Ukraine conflict and the Palestinian Israeli war, the unexpected recovery of the global market, and the growing number of uncertainties, making new contributions to ensuring national energy security.
4. Make new contributions to ensuring supply and stabilizing prices
The entire petrochemical industry and agricultural chemical enterprises, in accordance with the deployment and requirements of the National Development and Reform Commission and the Ministry of Industry and Information Technology to ensure supply and stable prices, continuously increase innovation efforts, research and timely put into production new types of fertilizers such as high-efficiency compound fertilizers, slow-release fertilizers, and liquid fertilizers, as well as a series of high-efficiency green and environmentally friendly new pesticide varieties and new dosage forms, to meet the nutritional needs of different regions and plants, as well as the prevention and control of diseases, pests, and weeds.
In 2023, the total fertilizer production (net) increased by 5% year-on-year, exceeding the domestic apparent consumption by 3.6 million tons. Among them, the nitrogen fertilizer production (net) increased by 7% year-on-year, exceeding the domestic apparent consumption by 6.44 million tons; The production of phosphate fertilizer (converted to pure) increased by 6% year-on-year, which is 1.6 times the apparent consumption in China. The production of pesticide raw materials (converted to pure) increased by 2.8% year-on-year, and the position of the world's largest pesticide production country has become more stable. For many years, exports have accounted for more than 70% of the production, and in the past two years, they have even reached 85%. Although the production of potassium fertilizer (converted to pure) decreased by 6.2% year-on-year, it accounted for 53% of the domestic apparent consumption, overcoming the difficulty of potassium resource scarcity and stabilizing the domestic market.
In summary, the production enterprises of agricultural and chemical products such as fertilizers and pesticides in the petrochemical industry have made important contributions to China's food security and the abundant market supply of fruits and vegetables. They have also made significant contributions to China's food production exceeding 1.3 trillion kilograms for nine consecutive years and achieving a "twenty year harvest".
At the same time, in 2023, the petrochemical industry has made new breakthroughs and progress in technological innovation, green and low-carbon transformation and digital upgrading, deepening international cooperation, cultivating world-class enterprises and modern industrial clusters, and researching industrial policies and major issues. While promoting high-quality development, the petrochemical industry, as an important pillar industry of the national economy, provides important supporting materials for various fields of the national economy such as textiles, construction, and automobiles, high-end manufacturing industries such as electronic information and rail transit, strategic emerging industries such as new energy and new generation information technology, as well as the realization of the C919 commercial aviation, Shenzhou family space relay, "Struggler" extreme deep diving, and other defense, military and aerospace fields, providing important guarantees and making significant contributions.
The year 2023, which has just passed, is a year of both difficulties and challenges, intertwined with old and new contradictions. From the operational data, it can be seen that the operating income, total profit, and total import and export of the petrochemical industry have all experienced varying degrees of decline. On the one hand, this reflects the increasing number of new difficulties and challenges, and on the other hand, it also reflects the regularity of economic development and the challenge of advancing in a wave like manner.
We need to objectively and rationally view such operational results. Although the data may not be as good as the first two years of the 14th Five Year Plan, dialectically speaking, it is still five years higher than the 13th Five Year Plan. Such results, along with many achievements and progress, are not easy to achieve! The key to achieving such results and progress is that the vast number of petrochemical enterprises and cadres and workers have set aside their shoulders to overcome difficulties, rolled up their sleeves to explore and innovate. It is the result of the entire petrochemical industry implementing the decisions and deployments of the Party Central Committee, fully and accurately implementing the new development concept, and continuously opening up new development patterns. It is also the result of strong support from relevant departments and the care and assistance of all sectors of society.
We extend our highest respect to the vast number of petrochemical enterprises, cadres and employees, as well as the families of employees who have silently made important contributions to the innovation and development of petrochemicals! I would like to express my heartfelt gratitude to all relevant departments, leaders at all levels, and friends from all walks of society who care and support the high-quality development of the petrochemical industry!
2、 Challenges and analysis of high-quality operation in the petrochemical industry
While acknowledging the achievements of the petrochemical industry in 2023, we also need to recognize that there is still a gap between the petrochemical industry and the primary task of high-quality development. This requires the collaborative efforts of the entire industry and various petrochemical enterprises to continuously innovate and solve each problem one by one.
There is still room for improvement in efficiency. The position of a petrochemical powerhouse is increasingly consolidating, but compared to developed countries and multinational corporations, our weak core competitiveness and significant efficiency gap have always been our pain points. In 2023, the profit margin of the entire industry's operating revenue was 5.47%, which is not only horizontally lower than developed countries and regions such as the United States, Europe, and Japan, but also vertically lower than its own historical good years. It is even lower than the first two years since the 14th Five Year Plan (6.8% in 2022 and 8% in 2021).
From the operating data closely related to efficiency, the operating cost per 100 yuan increased by 0.7 yuan compared to 2022, and the industry's loss area expanded by 2.8 percentage points compared to 2022. The loss of loss making enterprises accounted for 25.2% of the industry's total profit, and inventory was 1.7 trillion yuan, accounting for 10.6% of the industry's total operating revenue.
The accounts receivable of the oil and gas and chemical sectors have both increased significantly, the management expenses of the oil and gas and refining sectors have increased significantly, and the financial expenses of the refining and chemical sectors have increased significantly. All of this proves that there is great potential and space for cost reduction, efficiency improvement, and efficiency improvement.
The severity of overcapacity must be taken seriously. In order to alleviate the contradiction between "low-end surplus and high-end shortage", the petrochemical industry has been continuously innovating and developing rapidly since the 13th Five Year Plan. The contradiction between the shortage of high-end products and high-performance materials has been alleviated to some extent, but the situation of basic products and general materials surplus has not improved, and it is becoming increasingly serious. Especially for a long time, the traditional thinking and development concept of "scale based heroes" and "excessive weight increase, neglecting quality improvement" have been at the forefront, coupled with the constraints of weak original innovation capabilities and technological bottlenecks, resulting in a large amount of investment mainly focused on expanding scale and quantity, while relatively few have invested in structural optimization, high-end and differentiation. This has resulted in few basic products and general materials today whose production capacity is not the world's first, while high-end polyolefins and their elastomers, high-end electronic chemicals and high-purity reagents, high-performance fiber composite materials and high-performance membrane materials rely on imports for a long time, or some key monomers and raw materials are difficult to overcome for a long time, and even have a bottleneck problem.
If the current situation of "low-end surplus and high-end shortage" does not change, China's petrochemical industry can only hover in the middle and low end of the industrial chain for a long time, can only be trapped in the vortex of overcapacity for a long time, and can only look at the shining beacon of a petrochemical power from the platform of a petrochemical power.
The bottleneck of resource constraints is once again highlighted. The resource bottleneck of developing the petrochemical industry in China, which is characterized by a shortage of coal, oil, and gas, is difficult to break through. Compared with Japan, South Korea, and Europe, we seem to have some resource advantages, but the gap in resource advantages compared to the United States, Russia, and the Gulf region is very obvious.
Overall, in addition to relatively abundant salt mineral resources, China not only lacks oil and gas, but also lacks phosphate and potassium mineral resources, as well as lithium and boron mineral resources required for the development of the chemical industry, fluorite resources for fluorine chemical industry, barite and celestite resources for barium strontium salts, and so on.
The most typical example is the development of the petrochemical industry's main energy and raw materials, oil and natural gas. In 2023, the import volume of crude oil was 564 million tons, and the processing volume was 735 million tons, both reaching historical highs. The import volume of crude oil increased again after two years of continuous decline, and the processing volume returned to positive growth after a 3.4% decrease in 2022. In 2023, China's external dependence on crude oil increased again from 71.2% in 2022 to 72.9%.
In addition, there are obvious resource bottlenecks, such as the light hydrocarbon resources used for ethane cracking to produce ethylene and propane dehydrogenation to produce propylene, which mainly rely on imports and are subject to significant fluctuations in supply chain security. Compared with North America and the Gulf region, their competitiveness is greatly reduced.
Fourthly, modern coal chemical industry is facing new bottlenecks. Modern coal chemical industry is a unique advantage of China and one of the few leading fields in the world. Since the national layout of the "Four Modern Coal Chemical Industry Upgrade Demonstration Bases", significant innovations and breakthroughs have been made in coal to oil (direct and indirect methods), coal to gas, coal to olefins, coal to ethylene glycol, and coal to aromatics, accumulating important experience in engineering and industrialization. In addition, in-depth research and exploration have been carried out in the complementary development of coal chemical and petrochemical industries, as well as the coupling development of coal chemical and new energy, providing technical reserves and strategic guarantees for national energy security.
However, modern coal chemical industry has been struggling since its upgrade and demonstration. In the past few years, coal to olefins was the most profitable and successful demonstration industry chain. Coal to oil has always hoped for policy support for exemption from consumption tax, while coal to gas and coal to ethylene glycol have been in a loss making state, especially the operating rate of coal to ethylene glycol has always been below 50%.
In 2022, due to the high price of natural gas in the world market affected by the Russia-Ukraine conflict, and in addition, coal to gas enterprises have solved the problem of pipeline access that has puzzled them for many years, coal to gas enterprises have ushered in another good year since the upgrading demonstration.
But in 2023, the modern coal chemical industry encountered new difficulties, with a significant decline in efficiency. According to the prediction of the Coal Chemical Industry Special Committee, the profit from coal to oil decreased by 52.7% year-on-year, the profit from coal to gas decreased by 39% year-on-year, and the profit from coal to olefins decreased by 82.4% year-on-year. Coal to ethylene glycol continued to lose 1.87 billion yuan in 2023 after consecutive years of losses; The performance of coal to olefins in previous years has declined, with a year-on-year decrease of 7.8% in revenue. Despite a significant decline of 82.4% in profits, the revenue profit margin is only 0.52%. The new challenges faced by modern coal chemical industry include factors such as high prices of raw coal and electricity, as well as insufficient product structure similarity, differentiation, and high-end development. Coal to ethylene glycol and coal to olefins even face homogenization competition with petrochemical product models, as well as international competition with different raw material routes such as integrated refining and light hydrocarbon to olefin production. Today's new dilemma may be one of the major challenges to be experienced in upgrading demonstration facilities.
The fifth is the urgent need for intrinsic safety. According to the recently released "2023 Petrochemical Industry Public Opinion Report", the safety situation in 2023 is more severe than in previous years. Accidents occurred in Panjin Haoye on January 15, Luxi Chemical on May 1, Yiding Agriculture in Ordos on September 7, and Qilu Petrochemical on December 23. The alarm for safety production is constantly ringing, and the requirements for intrinsic safety cannot be relaxed for a moment. The string of process safety must be tightened at all times.
This requires the majority of petrochemical enterprises to conscientiously implement the requirements of the Notice on Strengthening Safety Production in the Petroleum and Chemical Industry This Winter and Tomorrow Spring. It also requires all cadres and employees to always respect safety production, standardize operations, strictly implement their main responsibilities, make great efforts to consolidate the foundation of safety production work, strictly prevent and control safety risks in key areas and key links, and ensure the process safety and essential safety of petrochemical production.
The picture shows the press conference venue
3、 The Situation and Analysis of High Quality Development of Petrochemical Industry in 2024
In 2024, although the situation and challenges are becoming more complex, overall it will be a year of stabilization. From the perspective of the global economic background, 2024 will be a year of "bottoming out and stabilizing", laying a solid foundation for ushering in a new business cycle in 2025. The new situation we are facing in 2024:
One is that the slowdown in global economic growth will continue. Although the International Monetary Fund has released a relatively optimistic forecast, the world economic growth rate will continue to slow down in 2023 compared to 2022. At the just concluded Davos Forum, 56% of chief economists predicted that the global economy would weaken in 2024. The World Bank and OECD are expected to slow down by 0.2 percentage points, and multiple institutions such as JPMorgan Chase and UBS have also made similar predictions.
In 2024, the growth rate of developed economies is expected to slow down from 1.5% in 2023 to 1.2%, with the largest developed economy, the United States, expected to slow down from 2.1% in 2023 to 1.5%; As Europe gradually gets rid of the impact of the Russia-Ukraine conflict, its economic growth will rise slightly from 0.7% in 2023 to 1.2%. As emerging economies, India, Russia, and Brazil are all expected to maintain rapid economic growth, but developing economies are expected to be 1 percentage point lower than the average level of the past decade, while the second largest economy, China, is expected to maintain a growth rate of around 5%.
Overall, the global economic growth rate will continue to slow down in 2024, coupled with individual countries promoting decoupling and risk reduction, leading to intensified differentiation and regionalization and fragmentation of the world economy. The global trade growth rate has significantly declined, further delaying the recovery of the world economy.
The second is that uncertainty factors will increase. The first uncertainty facing the world economic environment in 2024 is mainly from whether the two sides of the Russia-Ukraine conflict can sign an armistice agreement? Will the conflict between Palestine and Israel cease or escalate? The smell of gunpowder in the Red Sea crisis is getting stronger.
In addition to these political factors and regional turbulence, the second uncertainty is when the US dollar will begin its interest rate cut cycle? This is also a key factor in the uncertainty of the world economy. Since the launch of interest rate hikes in March 2022 to curb inflation, the US dollar has come to an end in a new round of harvesting, which has had a serious impact on commodity prices and the world economy. However, the inflation level in the United States has not yet reached the expected target, and multiple international institutions predict that the US dollar will start a rate cutting cycle from the second half of the year. However, this also depends on the synergistic effect of major economies and energy dominant countries, as well as the degree of resolution of regional turbulence and local crises. If energy prices, commodity prices, and freight prices remain high and it is difficult for inflation indices in the United States and developed economies to return to normal levels, the timetable for the US dollar to start interest rate cuts will be delayed, and the world economy will continue to be under pressure.
The third uncertainty is that 2024 will be a "super election year" in history, with more than 70 countries holding summit or parliamentary elections. Firstly, the March elections in Russia seem to have no suspense, and the possibility of Modi's re-election in India is also high. However, the early November elections in the United States are still unpredictable and constantly affect countries around the world. In addition, there are also many uncertainties in the elections for the British Prime Minister and the European Parliament. This year with the most elections in history has added many new challenges to the world economy.
The fourth uncertainty lies in South America, which may be a new explosive point for the world economy in 2024. The inflation rate of Argentina, the second largest economy in South America, reached 114.3% in 2023, and the new government's governance measures have attracted high attention from the world; The elections in Venezuela and the regional dispute with Guyana not only involve the interests of multinational corporations such as ExxonMobil, but also inevitably affect the nerves of the United States with every move in the backyard. Will the uncertainty factors in South America become the two "butterfly wings" of the world economy in 2024? Worried.
Multiple uncertain factors coexist, and any detonation will have a serious impact on the world economy.
The third is that energy transformation will accelerate. Energy transformation has always been a driving force for social progress. The first and second industrial revolutions were both driven by energy transformation, with coal replacing firewood entering the "steam engine era" as a representative and oil replacing coal entering the "electrification era" marked by internal combustion engines. This laid a solid technological and material foundation for the third industrial revolution represented by information technology after World War II.
Since the new century, the energy transformation has begun an accelerated process. Europe and several energy companies such as BP, Shell, and Total have accelerated their transformation from traditional energy to new energy, namely clean energy. If in the past 20 years, everyone has been exploring and even hesitating, today energy enterprises have pressed the accelerator button to adapt to the new requirements of low-carbon development and transition towards green and low-carbon.
At a time when Eurasian energy companies are accelerating their transition to clean energy, the large-scale acquisition of fossil resources by North American energy companies is worth paying attention to. In October 2023, ExxonMobil announced its acquisition of Pioneer Natural Resources for $59.5 billion to establish its dominant position in the Permian Basin. Subsequently, Chevron announced its acquisition of Hess Corporation for $53 billion to establish its advantageous position in unconventional and deepwater fields.
Are these new trends in the energy sector in 2023 telling us that the transition from traditional energy to clean energy is a long process, and during this long transition period, we need to go through: fossil energy as the main source in the early stage, clean energy as the auxiliary source, fossil energy and clean energy as the equal emphasis in the middle stage, fossil energy as the auxiliary source and clean energy as the main source in the later stage, and finally transition to the complete exit of fossil energy from the energy field, making clean energy the ultimate energy source of human society.
Can we boldly imagine it? During this long transition period, the world's fossil energy consumption will peak in 2030, and after reaching its peak, coal consumption will decline rapidly while oil consumption will decrease slightly. Over the next 20 years, oil will gradually shift from its primary role as an energy source to its role as a raw material source for chemical and synthetic material production. And natural gas will continue to grow in consumption after the peak of fossil energy, and in the next 30 to 40 years, it will play an important role in the transition from fossil energy to clean energy, even as the protagonist. Until controllable nuclear fusion and clean energy such as hydrogen became the main energy sources for humanity, natural gas also transformed into a raw material for chemical and synthetic material production, coexisting with oil.
The fourth is the acceleration of the green and low-carbon transformation process. In 2023, climate disasters such as heatwaves, floods, and forest fires around the world have sharply increased, resulting in heavy losses. According to multiple institutions, 2023 has become the hottest year on record on Earth. This further makes people realize that climate change is a common problem facing humanity and requires the international community to work together to address it.
A historic agreement was reached at the 28th United Nations Climate Conference held in Dubai from November 30 to December 13, 2023, initiating the accelerated process of fossil fuel transformation. Especially at this conference, the first inventory of the emission reduction targets proposed by the Paris Agreement was conducted, and the results of the inventory were not optimistic: none of the 195 countries that signed the Paris Agreement have achieved their promised emission reduction targets.
On one hand, there are frequent climate disasters, and on the other hand, emissions reduction is not ideal. In addition, the temperature has risen by 1.1 ℃, which is only 0.4 ℃ away from the 1.5 ℃ temperature control target established by the Paris Agreement. Faced with such a severe situation, the 28th United Nations Climate Conference once again reiterated that in order to achieve the goal of controlling warming, greenhouse gas emissions must be reduced by 45% compared to 2010 by 2030, and net zero emissions must be achieved by the middle of this century. Therefore, the goal proposed by this climate conference for new energy is to double the existing capacity of renewable energy sources such as solar and wind energy by 2030; The goal proposed for fossil fuels is to shift away from fossil fuels in a fair, orderly, and just manner, accelerate action in the next crucial decade, with the aim of achieving net zero emissions by 2050. At this climate conference, many countries have signed the Global Methane Reduction Commitment, and China has also announced its methane reduction plan.
These new measures and requirements to address climate change will have a profound impact on the development of China's petrochemical industry, especially in the fields of oil and gas exploration and extraction, chemical fertilizers, and feed nutrition.
4、 Strive to create a new situation in the petrochemical industry of seeking progress while maintaining stability and promoting stability through progress
2024 marks the 75th anniversary of the founding of the People's Republic of China and a crucial year for achieving the goals of the 14th Five Year Plan. The challenges and situation in the new year are becoming more severe, and new difficulties may also increase. However, as long as we follow the deployment of the Central Economic Work Conference, adhere to the overall tone of seeking progress while maintaining stability, and do a good job in the "three overall planning", the Chinese economy will further consolidate and enhance its upward trend. It is expected that China's economic growth rate will continue to remain stable at 5% or above, contributing more than 30% of the world's economic growth and still playing the role of the world's largest engine of economic growth.
In the new year, the high-quality development of the petrochemical industry should focus on "promoting stability through progress" and solidly do a good job in various key work. "Promoting stability through progress" is the premise of progress, and progress is the goal of stability. "Promoting stability through progress" is to combine the overall situation with the opening up of new industries, combine the upgrading of traditional industries with the cultivation of emerging industries, combine innovation leadership with accelerating the transformation of old and new driving forces, combine the exploration of domestic markets with deep cultivation of international markets, take initiative and strive for progress, and achieve a new leap of steady progress in the entire industry.
1. New ideas for advancing new industrialization
New industrialization is an important engine for achieving high-quality development. The petrochemical industry, as an important pillar industry of the national economy, is also a resource-based, energy oriented, and fundamental supporting industry. This determines that the petrochemical industry itself should first achieve new industrialization, and the new industrialization of the petrochemical industry should take the lead in other fields of the national economy.
On the one hand, as a resource-based and energy based industry, the important characteristics of the petrochemical industry's new industrialization should be: high technological level, low resource consumption, low emissions of "three wastes", and good economic benefits. Only by building the petrochemical industry into such a modern industrial system can it meet the requirements of future industries, become a new type of industrialization with strong core competitiveness and create a better life for humanity, and completely change the current phenomenon of "color change in discussions" that does not conform to scientific logic.
On the other hand, the petrochemical industry, as a basic and important supporting industry, can make due contributions to Chinese path to modernization only if the new industrialization level is ahead of other industrial fields. The new industrialization of chemical fertilizers and pesticide industries is the premise and foundation of agricultural modernization; The new industrialization of coatings and pigments is the prerequisite and foundation for the realization of new industrialization in the construction and high-end coating manufacturing industry; Synthetic fiber monomers, as well as fine chemicals such as dyes and feed additives (vitamins, methionine), are directly related to the new industrialization of important areas of the national economy such as textiles, light industry, and modern animal husbandry; The new industrialization level of synthetic materials, new chemical materials, high-performance composite materials, etc. directly determines the new industrialization level of important fields such as automobiles, rail transit, large aircraft, national defense and military industry, aerospace, and national security level; The new industrialization of high-end membrane materials, high-performance fiber materials, and biosynthesis is closely related to the new industrialization in fields such as new energy, electronic information, lunar exploration engineering, and life and health.
It can be seen that without the new industrialization of the petrochemical industry, a country's new industrialization system will be difficult to form. If the new industrialization of the petrochemical industry falls behind, a country's new industrialization process will be severely hindered. This is the key to prioritizing the development of the petrochemical industry in developed countries such as the United States, Germany, France, the United Kingdom, and Japan, especially in the areas of new chemical materials, special functional materials, and specialized chemicals.
Therefore, the new industrialization of China's petrochemical industry must be solidly promoted through scientific and technological innovation, self-reliance, accelerating green and low-carbon transformation, especially focusing on digital transformation and intelligent upgrading, accelerating intelligent transformation and networking through the construction of smart workshops, smart factories, and smart chemical parks, so that the new industrialization of the petrochemical industry can play its due role and make greater contributions to Chinese path to modernization.
2. Innovation drives "progress" with new breakthroughs
Adhere to the core position of innovation in the overall modernization construction of our country. Innovation driven development is a key element and the primary driving force for the petrochemical industry and enterprises to move towards new industrialization and achieve high-quality development.
In recent years, significant achievements have been made in key areas such as oil and gas exploration technology, new chemical materials, specialized chemicals, and modern coal chemical industry. However, weak innovation capabilities have always been the biggest weakness and constraint in achieving our goal of becoming a petrochemical powerhouse. The high-quality development of the new era requires us to focus on technological self-reliance and self-reliance, promote key core technology research and development, promote industrial and supply chain security and stability, improve total factor productivity, and enhance development quality and efficiency. Implementing the "Four Orientations", deepening the implementation of the innovation driven strategy, building an industry innovation system, strengthening technological strategic support, taking self-reliance and self-improvement as the core, breaking through a number of "shortcomings" and "bottleneck" technologies that restrict industry development, seizing a number of technological high points, vigorously promoting cross disciplinary and cross industry collaborative innovation, organizing and implementing innovation projects and building innovation platforms, highlighting key common technology research and development, breaking through a number of key technologies, developing a number of high-end products, and promoting a key step from a petrochemical power to a petrochemical power.
In the innovation of new refining technologies, we will accelerate the upgrading of low-carbon deep processing technology for inferior residue, develop component refining, molecular refining, and direct chemical production technology for crude oil (heavy oil), improve the efficiency and selectivity of catalytic cracking, low-carbon alkane dehydrogenation, and hydrocracking reaction processes for crude oil (heavy oil), and increase the development and application of green, efficient, and independent refining catalysts.
For innovation in the field of modern coal chemical industry, major technological equipment research projects will be implemented, industrial technology optimization and upgrading will be accelerated, and original and integrated innovation will be promoted. Accelerate technological innovation in high-performance composite catalysts, one-step synthesis of olefins from syngas, and one-step production of low-carbon alcohol ethers to achieve industrial breakthroughs in coal to aromatics. Focus on large-scale and efficient coal gasification, new generation and efficient methanol to olefins technology equipment, key raw materials, and components, and promote the industrial application of key technologies such as the first batch of materials, the first set of equipment, and the first version of software; Optimize and adjust product structure, accelerate the development and application of high-end production technologies such as coal based new synthetic materials, advanced carbon materials, and degradable materials, promote the coupled innovation and development of modern coal chemical industry with renewable energy, green hydrogen, CCUS, etc., promote the digital construction of modern coal chemical equipment, and cultivate a number of typical smart production scenarios.
In the field of new materials in the chemical industry, the key is to enhance independent innovation capabilities, mainly focusing on key core technologies, major common technologies, and high-performance materials, as well as continuous and stable production of built facilities, and increasing the focus of technological innovation breakthroughs in products such as high-end polyolefins, polyolefin elastomers, high-end EVA/EVOH films, long carbon chain nylon, and aromatic nylon, as well as some key monomers, bio based new materials, and high-performance biodegradable materials.
3. New achievements in green and low-carbon transformation
Promoting green and low-carbon economic and social development is a key link in achieving high-quality development. The petrochemical industry belongs to both resource and energy industries. In the process of implementing the "carbon peak and carbon neutrality" strategy and moving towards new industrialization, it faces new requirements and new situations for green and low-carbon development, and its challenges are more arduous and severe.
The raw material structure of China's petrochemical industry is different from developed countries and the Gulf region, which use oil, natural gas, and light hydrocarbons as raw materials. In China's petrochemical industry, whether it is energy consumption for raw materials or fuels, the proportion of coal based raw materials and coal chemical routes is too high. The carbon emissions from coal based raw materials are much higher than those from natural gas and oil.
Compared with developed countries, the product structure of China's petrochemical industry is also biased, with an excess of bulk basic products and general materials, and a shortage of high-end products and high-performance materials. Developed countries mainly focus on new chemical materials and functional chemicals. In the process of producing basic chemicals, material consumption, energy consumption, and emissions are much higher than those of fine chemicals and high-performance materials. This requires us to base ourselves on the national conditions and resource endowments, the current situation and reality of the petrochemical industry, and promote the high-quality development of the petrochemical industry in accelerating the green and low-carbon transformation.
Refining enterprises should actively adopt clean energy and green electricity substitution, promote clean energy substitution in existing coal-fired self owned power plants (boilers), actively explore and research the application of solar heating in the refining process, gradually reduce the proportion of coal consumption, and improve the consumption level of renewable energy. Refining enterprises also need to increase the application of low-carbon production processes such as short processes, enhanced reaction processes, and ultra-high pressure steam generation from catalytic cracking waste heat, and strengthen the collaborative control of methane and volatile organic compounds. Refining enterprises also need to accelerate the demonstration application of CCUS, effectively reduce carbon emissions, and explore the development of hydrogen production tail gas and catalytic cracking flue gas carbon dioxide direct conversion, carbon dioxide dry reforming, carbon dioxide hydrogenation to produce oil products and chemical technology demonstrations. Refining enterprises also need to explore the integration and development with renewable resources, vigorously develop hydrogen production from renewable resources, carry out green hydrogen refining demonstration projects, promote green hydrogen substitution, and gradually reduce the amount of hydrogen produced from coal; Research and develop low-carbon refining technology evaluation standards, and explore pilot projects for carbon emission measurement and monitoring in refining enterprises.
Modern coal chemical enterprises should increase the implementation of energy-saving, carbon reduction, water-saving, and pollution reduction upgrades, improve the efficiency of resource and energy utilization, strengthen the leading and restraining role of energy efficiency, water efficiency, and pollutant emission standards, and steadily improve the level of green and low-carbon development of modern coal chemical industry; Strict energy efficiency and environmental constraints, proposed and under construction projects should fully meet the energy efficiency benchmark level, and the environmental protection of newly built projects should meet the performance A-level indicator requirements; Resolutely implement the requirement of water based production, promote the application of water-saving technologies such as closed loop cooling, and achieve industry-leading fresh water consumption per ton of product in new projects; Accelerate the comprehensive treatment of volatile organic compounds, stepwise recycling of high salt wastewater, advanced resource utilization, and resource utilization of solid waste such as ash and slag. Modern coal chemical enterprises also need to accelerate the large-scale and low-energy capture, utilization, and storage of high concentration carbon dioxide, as well as the development and industrial application of high value-added chemical technology; Promote the complementarity of coal-fired power, gas power, and wind and solar power.
Fertilizer, acid, alkali and other basic chemical production enterprises should prioritize energy conservation and emission reduction, vigorously promote clean production technology transformation and recycling, promote advanced and applicable energy-saving, low-carbon, water-saving technologies, and comprehensive waste utilization technologies, and attach great importance to the conservation and intensive utilization of various resources.
4. New measures to resolve overcapacity
The problem of overcapacity has become a prominent problem that troubles the healthy and sustainable development of industries and enterprises. Since the beginning of the new century, China's petrochemical industry has developed rapidly, with products continuously enriching, scale expanding, and industrial concentration gradually increasing. Basic chemicals have shown an excess state.
In 2010, China's petrochemical industry achieved a historic leap, leaping to become the largest chemical country, and the petrochemical industry ranked second in the world after the United States. At that time, the world economy was entering a new business cycle, and China's petrochemical industry, taking advantage of the national macroeconomic situation and the international environment, once again entered a new stage of centralized construction and rapid development, with further expansion of production capacity and increase in total volume. In 2013, China became a net exporter of refined oil products, marking a comprehensive surplus of bulk basic petrochemical products.
The surplus 10 years ago was objectively defined as "structural surplus", as the current situation was overcapacity in bulk basic products and general materials, while high-end specialized chemicals and high-performance materials mainly relied on imports. High end specialized chemicals and high-performance materials are precisely essential supporting materials for China's high-end manufacturing industry, strategic emerging industries, as well as electronic information, aerospace and other fields. If the external dependence is too high, the security risk of China's industrial and supply chains will be too high, and critical moments may be choked. Therefore, in August 2016, the State Council issued the Guiding Opinions on Adjusting the Structure, Promoting Transformation, and Increasing Efficiency of the Petrochemical Industry. Its guiding ideology and key task is to resolve the problem of overcapacity in bulk basic products and general materials, while accelerating the innovative development of high-end specialized chemicals and new chemical materials.
Since the 13th Five Year Plan, new breakthroughs and progress have been made in chemical new materials, specialized chemicals, high-performance fibers, high-end membrane materials, etc. The effect of resolving overcapacity in bulk basic products and general materials is not significant enough, and even some products have seen an increase in overcapacity. At the professional association symposium held in December 2023, nitrogen fertilizer associations, chlor alkali associations, soda ash associations, rubber associations, coatings associations, synthetic resin associations and other professional associations expressed high concern about overcapacity and concerns about the continuous increase in new production capacity. The problem of overcapacity in bulk basic products and general materials today is not only a prominent issue affecting the healthy and sustainable development of the petrochemical industry, but also a prominent problem that troubles petrochemical enterprises and entrepreneurs. It is also a prominent issue that multinational corporations are highly concerned about and vigilant about.
It can be said that resolving overcapacity has reached an urgent stage. The problem of overcapacity today is not only faced by basic chemicals such as fertilizers, acids, alkalis, coatings, pesticides, titanium dioxide, organosilicon monomers, PTA, PET, and general materials, but also by industries such as 1,4-butanediol, EVA, POE, adiponitrile, caprolactam, nylon 66, as well as lithium carbonate, lithium iron phosphate, and lithium hexafluorophosphate related to new energy power batteries. The ongoing and planned production capacity of many products is surprising. If the planned production capacity of some products can be completed and put into operation as scheduled, it is not only a problem to meet the domestic market demand, but also more than enough to meet the total consumption of the world market.
There is a set of data: in 2022, China's power battery installation accounted for 56.9% of the global total sales, energy storage battery shipments accounted for 87% of the global total, positive/negative electrode material shipments accounted for about 90% of the global total, electrolyte shipments accounted for 85% of the global total, and lithium battery separators accounted for 80% of the global market. It is predicted that if left unchecked, the planned production capacity of global power and energy storage batteries will be 12 times the global demand by 2025.
Firstly, to resolve overcapacity, we need to transform our development philosophy. For a long time, domestic petrochemical enterprises have mainly focused on "addition", which means investing, expanding production, and expanding scale to make enterprises bigger and stronger. This is a process that multinational companies have gone through in 40-50 years from the end of World War II to the 1990s. In the late 1990s, especially after entering the new century, the path for multinational corporations to grow and strengthen was to prioritize both addition and subtraction, with strengthening as the top priority, focusing on structural adjustment, restructuring and mergers, and strengthening core competitiveness. The merger and reshuffle of Dow DuPont is the most typical case. The adjustment and optimization of the original DuPont gave birth to Comus and NVIDIA, as well as Bayer's acquisition of Monsanto and BP's adjustment and optimization. It is precisely because of the continuous adjustment and optimization of BP that Ineos was born, and it is precisely because of Bayer's continuous adjustment and optimization that Covestro and Langsheng were born. Langsheng's re adjustment and re optimization also gave rise to Aramco. In 2023, Langsheng reorganized high-performance materials and DSM's engineering plastics into a new company, Envalior. The restructuring of Evonik's PMMA business has been given to Rom, as well as continuous adjustments and transformations by DSM, Solvay, and others. These well-known multinational companies have continuously strengthened their core competitiveness in the process of "adding and subtracting" operations over the past 20 years.
Many domestic enterprises today adopt the development model and philosophy of "building block operations, only adding without reducing" and "strengthening with the big", which is exactly the path that multinational corporations have taken 60 or 70 years ago. Today, which has entered the 1920s, is an era of global competition, especially with the domestic market becoming a major platform for international competition. If we do not change our habitual development concepts and traditional development models, the phenomenon of internal competition that entrepreneurs are troubled by today will only become increasingly serious. Some people thought that they could rely solely on expanding their scale and hoping to win. If they cannot timely shift to relying on innovation driven, talent driven, and the goal of becoming stronger and better, the building of their hopes may be difficult to stand. This is not sensationalism. Looking at the development history since industrialization, the journey of multinational corporations in developed countries, and some domestic enterprises, we will gain inspiration and will definitely make us ponder deeply.
The key to resolving overcapacity is to implement industrial policies effectively. Resolving overcapacity requires us to understand and implement the spirit of the Central Economic Work Conference, to fully, accurately, and comprehensively implement the new development concept, and to implement industrial policies that keep pace with the times.
Refining enterprises should implement the Guiding Opinions on Promoting Green, Innovative, and High Quality Development of the Refining Industry, strictly control the addition of new refining capacity, and include the addition and expansion of primary refining projects in relevant national approved plans. Capacity reduction and replacement and total pollutant control should be implemented, energy efficiency should reach benchmark levels, promote the orderly concentration of new refining projects towards petrochemical industry bases, achieve intensive agglomeration development, and make good supporting connections with ethylene and PX projects; New and expanded refining, PX, and ethylene projects that are not included in the Layout Plan shall not be constructed; It is strictly prohibited to indirectly approve the construction, renovation, and expansion of refining facilities under the names of "comprehensive utilization of heavy oil", "raw material pretreatment", and "asphalt equipment". Refining facilities with an annual output of 2 million tons or less, which have been recognized by relevant national departments as meeting the conditions and are allowed to be retained, if their energy efficiency and pollutant emissions cannot reach the benchmark level and meet the emission standards after energy-saving, carbon reduction, and pollution reduction upgrades, they will be accelerated to be withdrawn before 2025. The overall goal is to ensure that the total refining capacity by the end of the 14th Five Year Plan is controlled within 1 billion tons, and that the refining capacity of 10 million tons accounts for about 55%.
Modern coal chemical enterprises should implement the Notice on Promoting the Healthy Development of Modern Coal Chemical Industry, strictly control the production capacity and new coal consumption of modern coal chemical industry, and shall not use reduced coal supply for modern coal chemical project construction; Build new projects such as coal to olefins, coal to PX, coal to methanol, coal to ethylene glycol, and coal to biodegradable materials, with a focus on concentrating in areas with relatively abundant coal resources and good environmental capacity, promoting industrial agglomeration and park development; It is strictly prohibited to increase coal chemical production capacity in key areas for air pollution prevention and control, and to avoid homogeneous and low-level redundant construction. Accelerate the transformation of enterprises that cannot stably meet the standards for pollutants, and order enterprises with serious exceeding emissions to suspend operations or close down in accordance with the law; Reasonably grasp the development scale of the coal chemical industry, continuously improve the quality of development, and promote the healthy development of the industry.
The third important measure to resolve overcapacity is to deepen supply side structural reform. The current overcapacity in the petrochemical industry is mainly due to severe overcapacity in bulk basic products and general materials, while there is still a certain amount of high-end specialized chemicals and high-performance materials that need to be met through imports. This indicates that there is an oversupply of bulk basic products and general materials, while high-end specialized chemicals such as electronic chemicals, high-purity and ultra pure reagents, as well as domestic enterprises such as high-end polyolefins, POE, long carbon chain nylon, high-performance fiber materials, and high-end membrane materials, are in short supply. Even high-end membrane processing enterprises rely mostly on multinational corporations for the supply of raw material resins, among which polyolefins for new energy battery separators are one of them. This proves that it is necessary for domestic enterprises to deepen the supply side structural reform, improve supply, expand the market, further increase the types and models of supply, further enhance the quality and stability of products, and further enhance the supply capacity of enterprises through innovation and research and development. There is also a large market space.
5. "Specialization, refinement, uniqueness, and novelty" and "advancement" have new vitality
Large enterprises should make more efforts to cultivate world-class enterprises and modern petrochemical industry clusters. The private economy dominated by small and medium-sized enterprises is also an important part of the national economy, a new force to promote Chinese path to modernization, and an important foundation for high-quality development of the economy and manufacturing industry.
For a long time, private enterprises in China's petrochemical industry have made important contributions to the innovation and development of the petrochemical industry.
As of the end of 2022, among the 377 listed petroleum and chemical companies, private and privately owned enterprises accounted for 70.8% of the total, especially in the fine chemical fields of pesticides, coatings, dyes, additives, and plastic processing and rubber products. The number and production capacity of private enterprises exceeded 80%. Among the 1523 recognized specialized, refined, and innovative "little giant" enterprises in the petrochemical industry, private enterprises account for 90%; Among the 165 recognized individual champion enterprises, private enterprises account for 82%.
Among the private petrochemical enterprises, there are a group of Fortune 500 companies such as Hengli, Zhejiang Petrochemical, and Shenghong, as well as a group of innovative, outstanding, and internationally renowned excellent companies such as Xinhecheng, Dongyue, Fuhua, Huafeng, and Oak. Private enterprises play an indispensable role in the development of the petrochemical industry in major petrochemical provinces such as Shandong, Guangdong, Zhejiang, and Jiangsu. Private enterprises in the refining and tire industries of Shandong Province are important backbone, while private enterprises in the plastic processing industry of Guangdong Province have a great influence both domestically and internationally. In the fields of chemical new materials, fine chemicals, and specialized equipment manufacturing in Jiangsu and Zhejiang provinces, private enterprises are the main force.
However, the development bottlenecks that have existed in private enterprises for many years have always been difficult to break through. The most common problems are the difficulty and high cost of financing, as well as fair competition in bidding, purchasing services, and other aspects. There are also problems such as small enterprise scale, weak innovation and research and development capabilities, slow technological upgrading and competitiveness improvement. This has become a dilemma and long-term bottleneck for the high-quality and healthy sustainable development of private enterprises.
The key to the healthy and sustainable development of small and medium-sized enterprises is to firmly grasp "specialization, refinement, uniqueness, and novelty". Private enterprises, especially small and medium-sized enterprises, must not prioritize the pursuit of scale as their primary goal. The growth and strength of large enterprises cannot solely rely on pursuing scale, but on strengthening leading industries and core competitiveness. Private enterprises, especially small and medium-sized enterprises, need to put more effort into "specialization, refinement, uniqueness, and novelty". Private enterprises, especially small and medium-sized enterprises, should learn from the philosophy of a hidden champion enterprise in Germany, which is "not striving for the top 500, but living for 500 years". Drawing on the concept of "one meter wide market, one hundred meters deep" from Mori Technology, they should focus on "small yet beautiful" and aim for "small yet strong". Such private enterprises will surely grow into century old enterprises.
Zhejiang Aoshou is a company with around 300 employees, founded by Dr. Hou Jun, who studied under Academician Peng Xiaojun. It has only been established for 10 years and has achieved outstanding results in the field of functional fine chemicals for chips through independent innovation. Aoshou's chip packaging materials, chip electroplating solution, chip cleaning solution, silicon wafer grinding solution, cutting protection solution, etching chemicals, photosensitive polyimide and other products not only fill the domestic gap, but also break the market monopoly of the United States, Japan, Germany, South Korea and other countries, achieve the localization of materials, and provide important support for the independent development and safe and controllable control of China's integrated circuit industry.
The second important measure for the sustainable development of small and medium-sized enterprises is collaborative innovation. Looking at both domestic and international situations, small and medium-sized enterprises usually do not have their own research institutes or science and technology innovation centers like large enterprises. Due to limitations in scale and number of personnel, their innovation capabilities are mostly weak, and there is no need to invest heavily in building large research and development platforms due to their own limitations. Innovation is essential for many private small and medium-sized enterprises to achieve high-quality and sustainable development, as it is the primary driving force for development and the inexhaustible driving force for sustainable development.
Collaborative innovation is an important measure for private enterprises and many small and medium-sized enterprises to overcome their own insufficient innovation conditions and weak innovation capabilities. One of them is to carry out collaborative innovation with upstream and downstream enterprises in the industrial chain. Entrusted innovation is more important for private enterprises and many small and medium-sized enterprises. You can entrust excellent teams and key laboratories in universities to carry out innovative research and development, or you can entrust independent research institutes or National Engineering Research Center to carry out engineering innovation. This is the second.
Leveraging social innovation resources and research and development capabilities to assist private enterprises and their numerous small and medium-sized enterprises in achieving "specialization, refinement, uniqueness, and novelty" and maintaining strong vitality should be an important and practical choice for private enterprises and their numerous small and medium-sized enterprises.
The third important path for the healthy and sustainable development of small and medium-sized enterprises is internationalization. Private enterprises, mainly composed of small and medium-sized enterprises, believe that internationalization is related to large enterprises and has nothing to do with themselves. This understanding is one-sided and even incorrect. Private enterprises with small and medium-sized enterprises as the main body are also an important force of internationalization. The all-round opening up includes private enterprises and small and medium-sized enterprises. The "the Belt and Road" and "RCEP" cannot be less private enterprises and small and medium-sized enterprises.
For the development of private enterprises and their small and medium-sized enterprises, it is very important and necessary to do a good job of "specialization, refinement, uniqueness, and novelty" to connect with world-class and world-class enterprises; For private enterprises and entrepreneurs, it is equally important to broaden their international perspective, communicate with world-class enterprises on the same stage, seek common development, and work together to contribute wisdom and strength to the community with a shared future for mankind in the era of globalization.
The fourth point is that Germany's approach of supporting the development of small and medium-sized enterprises is worth learning from. Germany is a world-class economic and technological powerhouse, with small and medium-sized enterprises as the main body in its economic and industrial structure, and a clear positioning and coordinated development pattern for large, medium, and small enterprises.
The competitiveness of German small and medium-sized enterprises is the strongest in the world. According to statistics from the European Commission, Germany accounts for 47% of the more than 2000 leading medium-sized enterprises worldwide, nearly half of them. Among the 3.5 million domestic enterprises in Germany, small and medium-sized enterprises account for up to 98%, contributing more than one-third of sales and about 62% of employment.
The German government has always attached great importance to the development of small and medium-sized enterprises, whether it is Industry 4.0, National Industrial Strategy 2030, Industrial Joint Research Program, or SME Innovation Concentration Program, all of which attach great importance to and provide strong support to small and medium-sized enterprises.
Firstly, Germany's phased policy support for small and medium-sized enterprises is worth learning from. Entrepreneurship stage: Led by the government, commercial banks participate in the establishment of venture capital companies to support small and medium-sized enterprises in entrepreneurship and innovation through non-profit models; Development stage: Establish policy exclusive banks, guide guarantee institutions to participate through indirect financing, and encourage mutual assistance and cooperation among enterprises; Mature stage: Encourage market-oriented financing (issuing stocks or corporate bonds) to participate in the development of small and medium-sized enterprises. These policy measures ensure the funding needs of innovative enterprises at different stages of development.
Secondly, Germany's model of supporting innovation in small and medium-sized enterprises is worth learning from. The Fraunhofer Institute, established by the German government in 1949, focuses on applied research and provides commercial solutions to enterprises, helping them achieve their goals. It bridges the gap between basic research and industrialization.
In Germany, whether large or small businesses, they will contact the Fraunhofer Institute as soon as they encounter technical challenges. After receiving technical issues, the Fraunhofer Institute will form a dedicated team to be responsible for this project. This project team is not temporary and usually lasts for two years until the technical difficulties are resolved for the enterprise.
Compared to large enterprises, small and medium-sized enterprises in Germany receive more assistance from the Fraunhofer Institute and achieve more significant results. Because large multinational corporations like BASF have strong innovation centers and research and development capabilities around the world, their cooperation with the Fraunhofer Institute is mostly in the form of commissioned projects, mainly in the early stages of innovation.
Thirdly, Germany's service approach to supporting small and medium-sized enterprises is worth learning from. Germany has established representative offices, the German Chinese Chamber of Commerce, and the German Business Center in Beijing, Shanghai, and other places. These institutions mainly provide services and assistance for German enterprises to invest in China. Not only does it provide professional and efficient office services, but it also provides company custody services, accounting and financial services, business expansion services, legal consulting, as well as translation, business reception, telephone fax and network, letter custody, business secretary, and children's contact with schools.
This is the greatest help for a company that has just started investing and starting a business in an unfamiliar environment, especially for small and medium-sized enterprises. Compared to large companies, small and medium-sized enterprises are not only newcomers and unfamiliar with the land, but also lack human resources. Through the services of business service centers, their unfamiliarity with unfamiliar environments, faces, and languages is greatly reduced, which is beneficial for adapting to the new environment and enhancing development confidence. It also saves many burdens such as public facilities and auxiliary personnel for small and medium-sized enterprises.
The old year has passed, and the new year has arrived. We are in a beautiful era, as well as a complex and ever-changing one. The game of great powers and regional turbulence are intensifying, the international environment is becoming increasingly complex, and the uncertainty of the world economy is increasing. But in the new year, the global economy will usher in the dawn of a new business cycle in the "bottoming out and stabilizing". China's economy will further consolidate its recovery trend. The petrochemical industry is in a critical period of changing the development concept, accelerating structural optimization, and improving the quality of development. Let us work together to forge ahead, coordinate innovation, and create a new situation of seeking progress while maintaining stability and promoting stability through progress. We will make new and greater contributions to achieving the goal of becoming a powerful petrochemical country and Chinese path to modernization!
Finally, I wish everyone a happy Spring Festival! Family happiness! Lucky the Year of the Loong! Thank you all!
来源：中化新网 图：张育/摄
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