Globally chemical companies have benefitted tremendously riding high on China’s economic growth of the past two decades. But that is evidently changing. China’s GDP growth rate has shown signs of levelling off in the last few years and is transforming into a consumption-driven economy from one driven by manufacturing and exports that drove the global economic growth over the last 20 odd years.

As China’s chemical sector shows sign of becoming increasingly competitive, six independent Chinese oil refiners along with a provincial government-backed fund have set up a US $ 5 billion joint venture (JV) called Shandong Refining & Chemical Group that would compete with major players, including state owned and private sector companies, in the chemical industry.

Shandong Dongming, Shandong Qingyuan Group, Shandong Tianhong Chemical, Shandong Shouguang Luqing Petrochemical, Wudi Xinyue Fuel and Chemical, and Shandong Shengxing Chemical. Dongming is the JV’s biggest stakeholder with 22.63 per cent stake. Its subsidiary Jiangsu Xinhai Petrochemical is also a stakeholder in the JV. The JV’s second largest stakeholder is provincial government-backed fund Shandong Marine Group that owns 22.59 per cent in the new entity.

The JV is aimed at helping the alliance members to coordinate their production, marketing, crude oil imports and investments. Furthermore, it will pool funds and resources to produce fuels and chemicals more efficiently as they battle stiff competition in an increasingly saturated market and under tightened environmental and tax scrutiny.

The six partners boast of government approved crude oil quotas totalling 23 million tonnes a year, with combined refining capacity of 32.6 million tonnes a year.