LEADING Chinese petroleum business Sinopec Shanghai Petrochemical Company Limited (Shanghai Petrochemical) says that while China’s economy, petrochemical and oil refining sector continues to perform strongly, the nation faces a difficult final six months in 2016.

Reporting on the company’s six month performance for the period ended 30 June, 2016, Shanghai Petrochemical chairman, Wang Zhiqing, said that China was still achieving solid economic growth.

“In the first half of 2016, China’s economy faced the complicated domestic and international environment and the increased downward pressure on its growth. China accelerated its supply-side structural reform and supported the start-up business and innovation, which enabled the economy to achieve an overall steady development and recorded a GDP growth of 6.7% for the first half of 2016, representing a decrease of 0.3 percentage points as compared to the same period last year,” he said.

Mr Zhiqing said there had been a noticeable fall in investment in the petrochemical sector in China in the first half of 2016, but things appear to be on an upward spiral again.

“The petrochemical industry in China was steady for the first half of 2016 in general as consumption of major products increased steadily, profitability of refined oil products improved while profit from the petrochemical business grew more rapidly. However, downward pressure affecting the development of the industry remains.

“While investment decreased and a new growth driver had yet to come, the industry was in the process of bottoming out and regaining confidence. The Group endeavoured to achieve progress in safety and environmental protection, operation optimization, market exploration, as well as cost and expenses reduction while facing the adversity and intensive market competition,” he said.

However, he had a gloomy forecast for the second half of the year for the Chinese economy and its petroleum sector.

“In the second half of 2016, the global economy will be clouded with more uncertainties. Given low prices for staple commodity, lackluster growth of advanced economies, weak investment and trading, coupled with the impact of uncertainties such as geopolitics and Brexit (the United Kingdom leaving European Union), the global economy will continue to be in a stage of profound adjustments and the challenges to an economic recovery will still be severe,”Mr Zhiqing said.

“Despite the unchanged fundamental long-term positive trend of China’s economic development, the downward pressure on the economy will remain enormous as the structural contradictions in the China’s economy will continue to be obvious, new drivers for economic growth are yet to emerge, and it will take time to formulate solutions to the overcapacity problem.

“Facing the serious structural overcapacity of the petrochemical industry in China, as well as the reform of resource tax in China and fees imposed on pollutants emissions, costs of petrochemical enterprises will definitely increase. The increasingly stringent safety and environmental standards of the state and acceleration of oil products upgrade will also pose tremendous challenges to the industry.

“Facing a challenging market environment, the Group’s approach will be more efficiency-oriented and market-oriented to ensure achievements in various aspects, including safety and environmental protection, optimization of system, reduction of cost and expenses, as well as corporate governance, which in turn will realise a continuous growth of benefits,” he said.