The Chinese chemical sector is becoming the focus of trade wars as manufacturing capacity increases and trade volumes expand
By Hepeng Jia/Shanghai, China
With a rapidly developing manufacturing capacity and expanding trade volumes, the Chinese chemical sector is becoming the focus of trade wars.
Recent cases of anti-dumping measures and punitive charges bouncing back and forth between China and the US are the latest evidence of the trend, with China spreading the net to cover imports of some materials from the EU and South Korea as well.
Wu Yan, deputy head of the Bureau of Industry Injury Investigation under the Ministry of Commerce, told an international trade forum held in Shanghai on 12 November that among the bureau’s investigations into damage to industry caused by foreign imports, 70 per cent of cases are within the petrochemical sector.
The Chinese chemical industry also suffers from foreign investigations into the sector’s exports to other countries. Besides dumping allegations, the industry is often hurt by accusations of infringement of foreign intellectual property rights (IPR). The IPR disputes often mean Chinese players have punitive tariffs imposed upon them, according to Hong Dingyi, secretary general of the Chemical Industry and Engineering Society of China. The chemical industry accounts for 40 per cent of new technologies around the world, but 70 per cent of major Chinese petrochemical companies and 90 per cent of smaller such enterprises do not own the core patents for their products.
This is why the Chinese chemical industry often becomes a victim of foreign actions resulting from IPR infringement allegations, Hong said at the forum.
The key solution to this problem for Chinese chemical firms is to positively develop their independent technologies and high-end products and avoid flooding foreign markets with cheaper Chinese versions of existing goods, he told Chemistry World.
Chen Naiwei, a law professor at Shanghai-based Fudan University, encourages Chinese chemical firms to develop systematic IPR strategies, which include learning about potential patent infringement on foreign competitors and positively dealing with foreign allegations on the issues in the international market.
Jiangsu Province-based Sinorgchem, China’s leading manufacturer of rubber additives, is one of the first Chinese chemical companies to have defeated US allegations. A group of US firms appealed to the US International Trade Commission (ITC) in 2005 to drive Sinorgchem’s product - rubber antioxidant - out of the US market because of alleged patent infringements.
’Although we only had several millions of US dollars in sales in the US market at that time, we chose to defend ourselves,’ says Stephen Choi, chief operations manager of Sinorgchem. After four years of struggle and up to US$20 million in expenditure, Sinorgchem eventually won the case, with the ITC ruling that Sinorgchem did not violate IPRs of the US firms.
’In international trade disputes, Chinese chemical firms need to rise up rather than simply give up the market,’ Choi told Chemistry World. ’Our experience shows that with proper planning, lawsuits in international trade are not as expensive as many have expected and the victory can result in good fortune and returns.’