China mulls on stimulus package for petrochemical industry

Special Report:Global Financial Crisis

BEIJING, Jan.22 -- China is expected to

announce a 500-billion-yuan stimulus package for the struggling petrochemical

industry.

The stimulus package includes 100-billion-yuan

investment in 2009 and 2010 for oil products upgrade, and investment of 400

billion yuan for construction of 20 new large-scale petrochemical projects,

China Business News reported, citing unnamed sources.

A general view of Sinopec refinery in

Zhejiang province.(Photo: China Daily)
Photo Gallery

The proposed package will be submitted to the State

Council for approval soon. Sources with China Petroleum and Chemical Industry

Association (CPCIA) said it is expected to be announced after the Chinese Lunar

New Year.

The nation had earlier announced stimulus packages

for steel and auto industries recently.

"The package will focus on oil products restructuring

and improvement on technology," an industry insider, who declined to be named,

said.

Under the package China plans to invest 60 billion

yuan this year to improve the quality of 60 million tons of gasoline to the

level of China III and China IV standards, which are equivalent to Euro III and

Euro IV standards, according to the report.

The country would also spend 40 billion yuan in 2010

to improve the quality of 60 million tons of diesel to similar standards.

China's two leading oil companies, China National

Petroleum Corp (CNPC) and China PetroChemical Corp (Sinopec) are expected to

fund the 100-billion-yuan investment.

China will also support domestic enterprises in

overseas mergers and acquisitions, especially in oil resources and the

fertilizer industry.

The package will also cover many other areas,

including the adjustment of export tax rebate policies in the sector and the

construction of more oil reserves.

Analysts said the package would mainly benefit

China's two leading oil companies, CNPC and Sinopec, as they are now managing

almost all the large oil refineries and chemical manufacturing plants.

Sinopec is also accelerating its pace in building new

large-scale manufacturing facilities, a source with the company told China Daily

in an earlier interview.

Some analysts said that the stimulus package will do

little to strengthen the weak demand, which is the main problem at hand.

(Source: China Daily)