BASF's new project demonstrates China's resolve to open wider

German chemical giant BASF on Saturday officially launched its largest-ever investment project in China, with investment estimated to reach up to 10 billion U.S. dollars upon completion.

Located in the city of Zhanjiang in Guangdong province -- China's forefront of reform and opening-up, the BASF smart Verbund project will initially include plants to produce engineering plastics and TPU serving a range of key industries.

As the first wholly foreign-funded project in China's heavy chemical industry, the Verbund project, with the first-stage units expected to come on stream in 2022, is a demonstration of the chemical behemoth's ambition to expand further into China, the world's largest market for chemical products.

Remote island under spotlight

Donghai Island, in the eastern bay of the Leizhou Peninsula at the southernmost tip of the Chinese mainland, was once a remote and unknown island in the South China Sea. The 286-square-km island only has a sparse population of 270,000 inhabitants. Yet the island has been chosen as the bearer of BASF's ambition to step further into China and Asia.

In the next decade, BASF will build an integrated site with an area of about 9 square km. The site will include steam cracking units with an annual production capacity of 1 million tonnes of ethylene and more than 30 production units that offer consumer market-oriented products and solutions.

These units are concentrated in downstream industries such as petroleum refining byproducts, chemical products and chemical byproducts.

BASF has been deeply involved in the Chinese market for many years. In 2018, BASF sold products worth more than 7.3 billion euros to customers in Greater China and had more than 9,000 employees in the region.

The Verbund site in Zhanjiang will be BASF's third production site worldwide, following Ludwigshafen in Germany and Antwerp in Belgium. The new capacity will enable BASF to meet the growing demand of its customers, particularly in the automotive, electronics and new energy vehicles industries.

"Zhanjiang is a perfect location for BASF to further strengthen our footprint of local production in China," said Dr. Stephan Kothrade, president of Asia Pacific functions and president and chairman of Greater China at BASF.

"By utilizing the latest digital technologies and applying the highest safety standards, the new Verbund site will be a role model for sustainable production contributing to the development of a circular economy in China," said Dr. Martin Brudermuller, chairman of the board of executive directors of BASF SE.

An open China benefits all

BASF's new move stems largely from China's determination to adhere to the policy of opening-up. China has vowed to keep its door open even wider amid rising trade protectionism. Policies to ease market access, strengthen intellectual property protection and expand imports have been promulgated.

Guangdong, which has always been at the vanguard of the reform, is among the top choices for foreign businesses to tap into the Chinese market.

"Guangdong has fully implemented the negative list for foreign investment and the list of industries where foreign investment is encouraged, fully opened up the general manufacturing sector, and allowed the establishment of wholly foreign-owned enterprises in nine major areas, including special vehicle manufacturing and new-energy vehicle manufacturing," said Sun Bin, director of the investment promotion bureau under the provincial department of commerce.

"The time needed to set up an enterprise in the province has been reduced from an average of 16 working days to less than three working days," said Huang Huadong, chief economist of the Guangdong provincial development and reform commission.

The province has also strengthened intellectual property protection by setting up an intellectual property court and an intellectual property protection center.

From January to October this year, Guangdong approved the establishment of 12,000 foreign direct investment enterprises, with the actual utilization of foreign capital reaching 130.25 billion yuan (about 18.5 billion U.S. dollars).

A number of landmark projects have been launched in Guangdong this year, including GE's Jieyang offshore wind factory, Merck's Guangdong innovation center, a high-end new materials project by Toray Industries of Japan and ExxonMobil's petrochemical complex.

The multinational giants' continued heavy investment reveal their confidence in the future of Guangdong, and the Chinese market as a whole.

"We are very happy about the continuous opening up of the Chinese economy," said Brudermuller. "It's a very strong message in terms of the partnership between China and Germany."

According to Brudermuller, China has the world's largest market share of 40 percent in terms of global production capacity in the chemical industry, and by 2030 that figure will be close to 50 percent. Therefore, China will be the main growth market for BASF.

More opportunities for global investors

The Guangdong-Hong Kong-Macao Greater Bay Area, with construction going full speed ahead, has already become a new "strategic highland" for global investors eying the Chinese market.

"Taking up less than one percent of China's land, the Great Bay Area generates more than 12 percent of the nation's GDP. It is the fastest in terms of innovation and growth rate among all similar areas in the world," said Sun Zhengjie, managing director of the Merck China Innovation Center.

Having worked in the United States, France and China, Sun said speed, agility and openness are the biggest characteristics of the Chinese market.

"Although there are still weaknesses in areas such as industrial foundation and intellectual property protection, these are rapidly improving," Sun said.