A companion brief, Hormuz tests the PRC petrochemical build-out, argued that the PRC has won the low-end bet but that the most advanced materials are not yet within reach. The petrochemical sector in the PRC is really two industries, and Beijing’s drive into advanced materials is widening the gap between them. One half, integrated and well-funded, is climbing toward the high end. The other, smaller and older, is being squeezed out. For mid-tier materials, the climb will work. For the most advanced grades, it will not, for years yet.
The shortfall at the top
For mid-tier categories (polyurethanes, organofluorosilicons, thermoplastic elastomers and functional membranes), self-sufficiency already exceeds 80 percent. The gap sits at the very top of the chain. Synthetic resins alone drew over US$40 bn in imports in 2024, resulting in a US$14 bn deficit, almost all in high-end grades: metallocene polyethylene, polyolefin elastomers, high-performance polycarbonate, the nylon-66 chain and halogenated butyl rubber. These are the priority targets for the 15th 5-year plan (2026–30).
Aggregate self-sufficiency in advanced materials runs around 56 percent, and just 52 percent in the grades emerging industries need. The headline electronic-chemicals figure of 67 percent for 2024 overstates the picture: locally made high-end photoresists are under 10 percent of supply. Chemicals, the ‘mother of emerging and future industries’, are the raw material behind EV batteries, AI server boards and humanoid robots. The grades the PRC cannot yet make therefore matter out of proportion to their volume.
seven major PRC petroleum bases
two industries in one
The map shows where the shift into higher-value materials is happening. Seven national petrochemical bases, designated in 2014 to concentrate scale and squeeze out scattered sub-scale plants, now hold around 58 percent of national refining capacity and have drawn over C¥1 tn in investment. A decade on, their fortunes have sharply diverged. Beijing decides which projects get approved and which get energy quotas, effectively picking winners among the bases.
Industry leaders are racing into new materials. Hengli’s Changxing Island base in Dalian, with cumulative investment around C¥300 bn, is extending from polyester into battery-separator film. Shenghong’s Lianyungang complex pairs refining with the world’s largest photovoltaic-grade EVA unit, making the encapsulant film used to seal solar panels. It aims to be the first zero-carbon petrochemical park by 2030. Sinopec’s Zhenhai base at Ningbo became the country’s biggest refinery in early 2025, at 40 million tonnes, and has launched a further C¥38 bn ethylene expansion. The contrast with the laggards is stark: Caofeidian’s flagship 15-million-tonne refinery was never approved, left off the 2014 list and running into local energy quotas, leaving a single C¥35 bn methanol-to-olefins project to carry the base.
Integrated, coastal, well-capitalised complexes are pulling toward the high end. Smaller, inland and standalone plants are being disciplined out. The same approvals and energy controls that cull the weak plants let the strong ones move upmarket.
the feedstock and carbon bind
The high-end push depends on feedstock the PRC cannot reliably secure. Some 70–80 percent of ethylene capacity runs on naphtha or LPG, much of it imported, with the Middle East supplying 60–70 percent of Asia’s seaborne naphtha in 2025. Planners want to shift toward ethane, a lighter feed that cuts emissions per tonne, but it is the least secure option of all: the US is the only major exporter, and S&P expects North American ethane prices to roughly double by 2030. The cleaner feed would deepen reliance on a single foreign supplier.
Coal is the obvious domestic fallback if oil imports are cut, but it is also the dirtiest feedstock, as the brief noted. Green hydrogen could cut coal-route process emissions by 50–60 percent, and pilots from Ningxia Baofeng, China Coal Group and Sinopec are testing it, but the deepest cuts fall in the 2035–60 window. The EU’s carbon border adjustment, live from 2026, is meanwhile pushing exporters toward full-chain carbon accounting they are not yet built for.
One near-term bright spot is recycling. In mid-2025 a plant in Jieyang run by Dongyue Chemical began turning mixed waste plastic back into the hydrocarbons that feedstock is made from, reportedly recovering over 92 percent of the usable material. Beijing wants this ‘urban mining’ scaled up sharply, toward 510 million tonnes of recycled resources a year by 2030.
testing the limits
The brief described Japan’s November 2025 photoresist controls, the alarm they raised, and Beijing’s response: standards, then capital, then guaranteed buyers. Photoresists sit where two of the PRC’s strategic gaps overlap: the light-sensitive polymers that pattern circuits onto wafers are both a chemical problem and a chip problem at once. Japan controls over 90 percent of the high-end market and almost all EUV-grade resist. That dominance is why a single tightening of supply lands so hard, and why it is the sharpest test of whether Beijing can close the high-end gap at all.
SAC (Standardisation Administration of China) issued the first national test method for EUV photoresists; the National Integrated Circuit Industry Investment Fund was steered toward core materials; the self-sufficiency target was put at a reported 40 percent by 2026, a quadrupling of the 2024 level. What the state can convene in months is standards, money and buyers. What it cannot convene is time in the fab. The development cycle for a new material runs over 15 years, and the gap is most evident in performance stability, which comes only from years of production. Most PRC firms still compete on price, speed and capacity rather than on core capabilities, leaving key upstream technologies dependent on imports. Only deep work with downstream users, Sinopec’s Li Chao 李超 argues, yields materials fit for purpose: products like battery-pack flame retardants and carbon-fibre composites for solid-state cells.
split timetable
So the gap closes on a split timetable. At the mid-tier, it is already mostly closed, and standards and capital will keep narrowing these grades through the 15th 5-year plan. At the frontier, the chokepoint grades where a single supplier can cut off supply will close slowly, if at all.
The categories the PRC has already mastered are where global overcapacity is worst and margins thinnest, while the frontier grades it cannot yet reach are where the profit sits. Closing the gap from the bottom up, therefore, risks deepening the very glut the brief described, unless the sector can reach the high-margin top before the middle floods. Zhao Jungui 赵俊贵 China Petroleum and Chemical Industry Federation, puts the task plainly: fill product gaps, strengthen performance stability, build frontier research reserves. The first is underway. The rest is the work of the next decade.
minding the gap
Zhao Jungui 赵俊贵 | China Petroleum and Chemical Industry Federation secretary-general; China Synthetic Resin Association chairman
The high-end gap is also a problem of discipline and standards. The route out, in Zhao’s account, runs through industry associations enforcing order, leading firms regulating their own conduct, and the retirement of substandard capacity on energy and environmental grounds. More capacity is not the answer.
He sees the deficit most clearly in synthetic resins, the segment he chairs, where the PRC still imports tens of billions of dollars of high-end grades each year. Closing that gap, he argues, means meeting the standards that international markets already set: his work on the impact of the EU’s REACH regime on PRC producers reflects a conviction that the sector will rise or fall on whether it can match the rules others write, not on how much it can build.
As vice-chairman and secretary-general of the China Petroleum and Chemical Industry Federation, Zhao speaks for the industry peak body; as chairman of the China Synthetic Resin Association, he leads the segment, synthetic resins, that drew US$41.4 bn of imports in 2024. He edited a study of the impact of the EU’s REACH regulation on the PRC petrochemical industry and how the sector should respond. Zhao has spent his career in petrochemical policy and regulation, including drafting work on the sector’s 11th and 12th 5-year plans.
Li Chao 李超 | Sinopec Economics and Technology Research Institute senior engineer
The way out of the glut runs through three moves, Li argues: cut costs by digitalising, add value by going high-end and green, and expand demand by going abroad. He reads the imbalance as stark. Global new capacity for basic petrochemical raw materials passed 40 million tonnes a year in 2023, growing over 5.5 percent against demand growth of just 1.8 percent, with the PRC accounting for 70 percent of the expansion. New chemical materials are the urgent front, he contends, a test of great-power competition and of the dual-carbon goals at once, with the openings in high-end equipment, new energy, and energy conservation. His advice to PRC firms is blunt: position early in Southeast Asia and India, and embrace AI to take out cost.
A market analyst known for reading the chemical cycle through a macroeconomic lens, Li is widely cited in the industry press. He is the author of ‘Chemical overcapacity: a dilemma that urgently needs solving’ (2024) and ‘Winning by quality or quantity? Opportunities and challenges in new chemical materials’ (2023), among numerous market-trend reports. He speaks often at industry forums on chemical logistics, safety and market strategy.