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Plan for Revitalizing the Petrochemical Industry Released [China Finance Information Network] On the 19th, the plan for revitalizing the petrochemical industry (hereinafter referred to as the “plan”) was reviewed and approved in principle at a meeting of the State Council’s executive committee. Affected by this, the three sectors of petroleum, chemicals, and pesticides and fertilizers all saw price increases across the board. An optimistic mood is spreading in the market. However, industry insiders told reporters that the petrochemical industry has a long history, and **unilateral preferential policies can only boost market confidence for a short time; they are not the decisive factor in changing the industry’s situation. The 20 major projects are mainly being driven forward by Sinopec and CNPC. According to data released by the China Petroleum and Chemical Industry Association, as of November 2008, there were 4,360 loss-making enterprises in the domestic petrochemical industry, accounting for 14.9% of all such enterprises; the total amount of losses incurred by these enterprises amounted to 160.595 billion yuan, a 605.6% increase compared to the previous year. Li Guohong, an analyst at Galaxy Securities, said that although this policy reflects the core principle of giving equal emphasis to maintaining growth and adjusting the economic structure, it provides greater policy support for industries such as fertilizers, pesticides, oil refining, and ethylene. However, since the gross margins of most petrochemical products are currently negative, a decline in the overall performance of the industry in the first quarter of 2009 is inevitable. Affected by the global financial crisis, it is difficult to export chemical products, and there will be no significant improvement in February and March; as a result, the domestic chemical industry will be unprofitable as a whole during the first quarter. A group of leading enterprises and key projects take on the responsibility of breaking through obstacles in the plan. The plan states that the growth rate of the petrochemical industry should be in line with the overall development pace of the national economy, with the value added increasing by around 15% per year; by 2011, this value added was expected to reach 1.75 trillion yuan. The 20 key construction projects that need to be given close attention are mostly refineries and chemical processing enterprises affiliated with Sinopec and CNPC; the beneficiaries of the other projects are also leading companies in the industry such as Yuntianhua, CITIC, and Shenhua. A number of specialized fine chemical companies will also benefit. Current reports indicate that specific products have also been included in the plans. According to those involved in formulating the plan for revitalizing the petrochemical industry, there are two main focuses in the appendix of the plan: the first is to support the products of key enterprises; therefore, the products of Sinopec and CNPC are likely to appear in the appendix of the plan ； Second is replacing imports; for products that are highly refined, sophisticated, and have high added value, this will be given emphasis in the planning. The petrochemical plan introduced this time is generally in line with previous expectations; in the short term, industry leaders will benefit the most, while in the long term, a number of specialized fine chemical companies will also benefit from industrial upgrading and the trend toward deeper processing of chemical products. Furthermore, with regard to the petrochemical revitalization plan, it is proposed to boost consumption of petrochemical products by implementing comprehensive measures such as expanding domestic demand, revitalizing key industries, and increasing food production. Some analysts believe that although increased financial investment in the petrochemical industry can significantly boost production in the steel, petrochemical equipment manufacturing, and electronic information sectors, it is **difficult to play a decisive role in creating demand**; therefore, guiding the withdrawal of outdated production capacity is the **key focus for future efforts**. “Whether there will be significant positive factors still depends on the release of specific details. ”The analyst said. And many people have also expressed different opinions on this. Lin Boqiang, director of the China Energy Economics Research Center at Xiamen University, said in an interview with reporters that the formulation of plans should focus on how to enable this industry to develop in a more orderly and rational manner, with an emphasis on medium- to long-term planning as a solid foundation for China’s 12th Five-Year Plan for this industry, rather than simply trying to save a number of companies due to the current downturn in the petrochemical sector. Related reports: The stimulus effect of the industrial revitalization plan on the stock market is diminishing. This Wednesday, the plan for the revitalization of the electronic information industry was approved in principle ； On Thursday, the plan for the revitalization of the light industry and petrochemical sector was approved. At this crucial moment when the A-share market was undergoing adjustments (after a series of sharp rises, the market dropped significantly on Tuesday and Wednesday of this week), the introduction of these three industry revitalization plans played an important role in alleviating the pressure associated with these market adjustments and in maintaining investor confidence. Boosted by relevant policies, the Shanghai Composite Index rose slightly by 0.78% on Thursday, and by 1.54% the previous day, thus stopping the sharp decline in the stock market. However, in the past, when other industry revitalization plans were approved, the related sectors saw significant price increases, and as a result such revitalization plans earned the nickname \"golden fingers\". The approval of these three industry revitalization plans did not result in significant increases in the related stock sectors; the \"magic solution\" failed, which came as a surprise to many investors. Regarding this phenomenon, Wu Youhui, a strategy analyst at GF Securities, pointed out that it is not the industrial revitalization plan that has a problem, but rather the overall market environment has changed. “A strong rebound in the early stage was driven, in large part, by ample market liquidity; moreover, the plans for the development of related industries provided excellent themes for market speculation. However, recent market rumors suggest that the central bank is investigating the whereabouts of loans, and liquidity could shrink significantly in February. Coupled with widespread disagreements among market participants regarding the future trend, trading volume has also dropped sharply, resulting in significantly less momentum for speculation compared to before. Therefore, with the introduction of three industrial revitalization plans in the past couple of days, it is only logical that the market did not surge as it used to. ” Wu Youhui said that the previous market rebound was not backed by fundamental factors, and it will take at least half a year before the relevant industrial revitalization plans can take effect. Therefore, during market adjustment periods, investors should focus on a defensive approach.