Introduction to Foreign Investment in Petrochemical Industry

In accordance with the Guiding List Concerning Foreign-Funded Industries jointly published by the State Development Planning Commission, the State Trade and Economic Commission and former Ministry of Foreign Trade and Economic Co-operation (MOFTEC), foreign investors are encouraged to invest in the following fields of the petrochemical industry: further processing of the needle-shaped coke and coal tar, the production of tamped coke and pitch for important roads. Foreign investment is restricted in the construction and management of factories for oil refinement.

Along with the development of reform and opening up to the outside world, petrochemical enterprises are speeding up their use of foreign capital and the property structure is moving towards diversification.

The China National Petroleum Corporation (CNPC), China Petroleum and Chemical Corporation (SINOPEC) and China National Offshore Oil Corporation (CNOOC) have succeeded in listing in overseas stock markets through their affiliates -- China Petroleum and Gas Ltd, China Petroleum and Chemical Ltd and China Offshore Oil Ltd. State-owned petrochemical enterprises began transforming into commercialized corporations with different kinds of proprietors.

In April and October 2000, the stocks of China Petroleum and Gas Ltd and China Petroleum and Chemical Ltd listed in the overseas stock market in succession. Shell, ExxonMobil and BP are the biggest strategic investors in the Chinese petroleum industry and the their capital contributions led to the success of stock listings abroad. On February 27-28, 2001, the stocks of China Offshore Petroleum Ltd are listing in the New York and Hong Kong stock markets, raising capital worth US$2.71 billion. Thus, China's three main petrochemical enterprises have realized their objectives of listing abroad.

In addition, transnational corporations around the world have already begun their investment in the Chinese market. BP, as one of the biggest petroleum and chemical corporations in the world and a leading investor in the Chinese petrochemical market, has invested more than US$3.5 billion in China and worked with CNPC, CNOOC and SINOPEC in upstream and downstream businesses.

Shell has injected US$1 billion into China as well, having established more than 20 joint ventures (JV) and offices and 40 JV joint-stock gas stations, 10 of which are stationed in Tianjin. And with about 20 percent of SINOPEC shareholdings, ExxonMobil owns 36 gas stations in China. To date, gas stations with a foreign-capital background number more than 400.

The approved petrochemical projects of foreign investments in 2000 totaled 36, down 26.53 percent from 49 in 1999; the contractual value totaled US$1.32471 billion, up 854.13 percent from US$138.84 million in 1999. The approved petrochemical projects in 2001 totaled 45 in 2001, up 25 percent over the previous year; the contractual value totaled US$164.38 million, down 88.6 percent over the previous year. The approved petrochemical projects in 2002 totaled 62, up 37.78 percent over the previous year; the contractual value totaled US$171.96 million, up 4.61 percent over the previous year.