China, Celanese and This Summer

One of the ever-present views of the economic climate is the slowing of China’s economy and the impact it’s having on the world. Celanese has major investments in Asia and China which represents about 20% of our annual revenues. So it has been a priority of mine to get a firsthand look at what’s happening there, to hear from customers, suppliers and to spend time with our employees.

Having just returned from four weeks in Asia I want to share some highlights of this trip. But before I do, let’s start with some statistics.

About China

China today has a total GDP of roughly $7.5 trillion. Its workforce of roughly 700 to 800 million people and is twice the size of the US’s workforce. It takes over five hours to fly across the country. There are 23 provinces, 4 municipalities and 5 autonomous regions each with a degree of independence. Benefiting from strategic planning, an engaged and energetic workforce, China has grown its GDP by 15% on average since 2007.  Each year about 12 million people come into the work force. So a GDP growth rate of 7% per year is needed to keep unemployment intact. While China’s approach to controlled growth has been very successful, its infrastructure is under stress. Long on coal and short on other forms of natural resources has led to severe air and water pollution and as well as dependency on oil imports. The population sits on a low level of arable land (15% of its total land area) and farming is for the most part still the livelihood of 700 million people.

Since last year, China’s economy has slowed dramatically. Exports to the US and more importantly Europe have fallen. Real estate speculation has driven the cost of houses to unattainable levels. Europe’s slowdown has also reduced foreign direct investments in this country. As China slowed we’ve seen the same trend in our businesses. So what’s going on? Will this economic situation worsen, or will things get better? I set out to find out the old fashioned way: ask.

Over 4 weeks in June and July I did just that and in the process learned a lot about the Chinese government, political challenges (yes, they have them too) and the general state of the economy. I met politicians, ministers, mayors, senior business executives, JV partners, customers and suppliers and listened to their perspective on the economy. And most importantly I sat down with the Celanese team to hear from them. To give you a peek at what that means over these four weeks. I . . .


What I’ve Learned

I have been to China many times in the last decade, and I learned more about the China’s political system, economic challenges and opportunities in this trip than in all the others combined.

The Chinese government has a major reorganization every ten years. Changing leaders for the Politburo, major ministries and even the Premier. It’s a very big deal. What’s clear to me through the leadership change, the government is totally focused on continued economic growth and addressing the social needs of the citizens of China.

Meeting with key ministers and the leaders of Chinese banks, they all presented a litany of efforts to continue the transition from an export-oriented economy to a higher-end consumer focused society.  The Chinese government is sitting on about 3 trillion dollars of cash. That is roughly equal to 50% of their GDP.  It was pretty clear to me they intend to use that cash over the next five to ten years to help maintain growth in the 7-8% range, and in the meanwhile address environmental and social challenges which are necessary steps in the government’s transition. Maintaining annual growth at the 7-8% range China will exceed US GDP by about year 2025. I expect that will happen.

So what does this mean for Celanese:

The Chinese economy has certainly slowed and it’s doubtful we’ll see the kind of growth going forward that we’ve seen in the past, however, the growth will be better than it is now, likely above $500 billion of GDP. At that level, the Chinese market will expand at almost twice the U.S. That’s pretty good.

I’d like to thank everyone I met during my visit. Your time and knowledge strengthened my belief that China will become an even bigger element in our company and the Celanese team is well positioned to support this growth throughout the region.  

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About the author


				Mark Rohr is chief executive officer and chairman of Celanese Corp. When he’s not working or blogging, Mark enjoys cycling, sailing and fishing.				

There are 7 comments. Add yours.

  1. Nadine Heeb says:

    Just wanted to highlight that I very much enjoy reading these blog entries from you and all the others that have made entries so far.

    • Mark Rohr says:

      Nadine, thanks for taking the time to read and share your perspective. Celanese is a globally diverse company and I”m hopeful our steps to do a better job sharing what”s going on will bring us all closer together. All the best.

  2. Allen Aradi says:

    Interesting summary on what was undoubtedly a very detailed “markets learning” trip to China.

    Alcohols serve as important feed stocks for a wide variety of products. Proper positioning of these feedstocks in the transportation fuels industry will be of particular importance to China to handle the rapid transformation from an export-heavy to a “consumer” society. In that regard, alcohols which are currently blending components in fuels, serve as an ideal feedstock platform for conversion into fuels quite indistinguishable from those being sourced from crude oil.

    • Mark Rohr says:

      Ethanol as a fuel additive will help dramatically reduce the amount of particulate matter in fuels, by some estimates reducing tail pipe emissions by 40%. That”s good news for Chinese citizens as they struggle to improve air quality. Thanks

  3. Magdalena Vargas says:

    Thank you for sharing the highlights of this trip as well as the statistics on China.

    I found it both concise and candid. It gave me a clear snapshot of China and what this country´s economy represents for both Celanese and the world in terms of opportunities and challenges.

    • Mark Rohr says:

      Magdalena, thanks for your comments. China is a great country and represents an opportunity for those willing to become part of the economy. Celanese is well positioned to continue to grow here and I expect it will play a role in helping China address several of their big challanges.

  4. Alice Tye Ligon says:

    Interesting insight to Celanese and their global presence. They are in good hands with such a forward thinking leader.

    Alice

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