Issue Date: May 3, 2004
THINKING BIG IN NANJING
There is a sense of momentum at the Nanjing Chemical Industry Park. Petrochemical companies worldwide are seeking to capitalize on the growth of the Chinese market, and Nanjing is high on their list of possible locations.
At the park, the Yangzi-BASF petrochemical complex is taking shape--on schedule, according to BASF. Elsewhere, heavy equipment is preparing a vast amount of space for the construction of other chemical plants. At the park's office, prospective investors and other visitors are competing for meeting rooms inside a building that was just expanded. And Nanjing appears set to welcome not just one, but two world-scale acetic acid plants.
Nanjing officials are clearly extending the red carpet to the industry. Determined technocrats are striving to turn the chemical industry park into a world-class center that compares favorably with similar undertakings in Singapore, Houston, or Rotterdam.
Refreshingly, officials are realistic about their current capabilities. "We're probably a bit behind Singapore in the quality of our human resources," says Kong Qiuyun, director of the Nanjing Municipal Development Office of the Petrochemical Industry.
Yet the service capabilities are already high. Xie Chong Xiu, vice president of the Nanjing Chemical Industry Park, says Nanjing's mayor sent her to the park a year ago on the basis of her professional and academic background. "International chemical companies need support from people who are familiar with multinational operations, know chemistry, and have a knowledge of economics," she says.
A longtime acquaintance of the mayor, Xie brought the mayor's attention to the need for international schools for the children of foreign executives. Important details like that can be easily overlooked in the economic master plan of a city like Nanjing with its 5.3 million residents.
A chemist who early in her career taught high school, Xie worked for nearly 15 years for Chinese and foreign chemical companies. She joined Nanjing's municipal government about five years ago. She says Nanjing is a natural place for petrochemical companies to set up. It is one of China's main oil-refining centers as well as one of the country's most affluent regions.
The impression one gets from Xie and her staff is that they are serious about solving concrete problems that chemical companies face when setting up in China. One example is the assistance they are providing to Celanese in its efforts to set up an acetic acid plant in Nanjing (C&EN, July 21, 2003, page 12). After Celanese announced its project last spring, it became obvious that the firm faced serious hurdles in implementing its plans, although this is something that the firm has consistently denied.
China Petroleum & Chemical Corp. (Sinopec), the owner of most of the petrochemical infrastructure in Nanjing, was against the Celanese project. Sinopec's position made it difficult for Celanese to source raw materials, ship its product, and make use of some roads in Nanjing. The outlook for the Celanese project became cloudier when BP and Sinopec announced intentions to set up an acetic acid project in Nanjing.
Xie says she and her staff are securing a previously unknown company, Hong Kong-based Wison, as a supplier of methanol. She says BOC, which already has a plant in Nanjing, has agreed to supply carbon monoxide. She is unconcerned about the concentration of acetic acid capacity in Nanjing. She points out that several companies are building purified terephthalic acid plants by the Yangtze River, which runs in Nanjing. All of them will need acetic acid.
Other than the multinationals, several of the companies moving into the park are Chinese firms that are expanding operations or that have been told to relocate. Xie says one of the biggest challenges she faces is ensuring that these companies adopt clean production methods. "Some companies may have produced chemicals like sulfuric acid for a long time," she says, but "they need to upgrade their methods of production."
Oddly, Xie seems most concerned that potential investors abroad are not aware of the infrastructure and services that Nanjing is ready to provide. But private investment in the park is exceeding expectations and will likely reach $7.5 billion by next year. And as China's hunger for petrochemical products continues to grow, the interest in Nanjing among chemical companies worldwide is unlikely to fade.
Pesticide Producer Strives To Become Industry Giant
While Nanjing's municipal government tries to drum up investment, one local business group is on a mission to expand its operations throughout China and the rest of the world.
WhenRed Sun Group was first profiled by C&EN in 2000, it had 500 employees. It now has 4,600. Annual sales have grown from $70 million in 2000 to $375 million today. The group has registered 230 products in 51 countries, and its exports amount to more than $70 million.
And the group is planning to get much bigger. It is building new facilities in Nanjing and in the city of Ma'anshan in Anhui province. It is expanding its product range and setting up a retail network to reach all Chinese farmers. Because Red Sun's pesticides are less harmful for the environment than most still in use in China, officials at both the central and municipal levels cooperate with the group's initiatives.
Red Sun's chairman and president, Yang Shouhai, is building what he believes to be the world's largest glyphosate plant in Nanjing, with annual capacity of 50,000 metric tons. In August, the first 20,000 metric tons of capacity is coming onstream. He is also expanding his capacity for pyridine, diquat, and the herbicide paraquat.
By next year in Ma'anshan, Yang says he will complete the construction of Asia's largest integrated insecticide facility. The plant will generate its own electricity and produce chlorine, up to 20,000 metric tons of the popular insecticide chlorpyrifos, as well as the herbicides trichlopyr and fluoxypyr. Red Sun has also signed an agreement with Cheung Kong, Hong Kong's largest business group, to set up facilities to produce up to 1 million metric tons of fertilizers.
Two years ago, with the support of several Chinese and foreign research organizations, Red Sun launched a range of biopharmaceuticals and food supplements. Sales of these products are already exceeding $25 million per year. They include the weight-loss product l-ephedrine--recently banned in the U.S.--and six cold remedies. Separately, after collaborating for eight years with Chinese research institutes, Red Sun has developed genetically modified corn, cotton, rice, rapeseed, and sorghum.
The group's most ambitious undertaking is probably its all-China retail network. Yang expects the Chinese pesticide market to be worth more than $35 billion in 2008, and he counts on Red Sun to capture a third of it. Sounding almost like a Chinese Communist leader as he speaks, Yang says that by 2008, Red Sun will run distribution centers in "1,000 counties, 10,000 towns, and 100,000 villages." His slogan, "yi qian xian, yi wan shi, shi wan zhen," is catchier in Chinese. The group's network already reaches 360 counties.
One troubling element is that the energetic Yang appears to be the key person in all of these developments. He's the one setting the group strategy. He's the politician who sweet-talks government officials into approving his projects. He's the one who knows all the numbers. He heads the group's market research efforts by frequently visiting peasants throughout China. And he even personally interviews--twice a day, he says--bright, foreign-educated graduates who are keen to join Red Sun.
When it's suggested that there seems to be a shortage of people whom he can trust in Red Sun, he counters that 20 of the 22 original founders are still working with him. It's an answer that fails to explain why Yang does not delegate more. When pressed further, he says work keeps him healthy. He is still at the office at 10 PM.
Yang's optimism for Red Sun knows no bounds. "We hope to make it into the Fortune 500 within five years," he says. "It sounds like a dream, but based on our ongoing development, it's not far-fetched."
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