IHS Chemical Week


China Well and Truly Stimulated, but for How Long?

10:01 AM MDT | September 17, 2009 | By LYN TATTUM

A general sense of optimism characterized the Chemical Week 6th annual CEO China Roundtable held on September 16, 2009 in Shanghai. China has benefited from a huge government economic stimulus, implemented swiftly in the second quarter 2009. The day after it was announced chemical companies have felt the benefit.

Increased spending has filtered through to the automotive and construction sectors in particular, with loans in the first half of 2009 exceeding those of 2007 and 2008 combined.

The danger of course is that too much ‘hot money’ could cause inflationary pressure. There is also caution that spending may slow in the fourth quarter as the government stimulus runs out of steam, confidence wanes, and restocking is completed.

Some multinational executives say they are already sensing some market weakness as inventories are rebuilt and overcapacity looms. There is no doubt that the specter of multi-million tons of ethylene coming on-stream in the Mideast and headed for China is unsettling. Plus, in China there are a couple of new crackers schedules for start up in the coming months and many more on the books as Sinopec and PetroChina move ahead with force.

Chinese executives point out that China is trying to build a harmonious society and find win-win solutions to develop its industrial base in cooperation with western companies. Translating this to talent management and recruitment means that expatriate management needs to be replaced with empowered local executives as soon as possible.

The complex matrix structures of western multinationals often work against local leadership and it is felt that in China, in particular, an understanding of local culture (if not language) is very important and should take precedent over global structures.

From a legal perspective, new labor laws are making the hiring landscape more tricky in China. Another major concern among Chinese executives is that China's version of Reach, introduced in 2003 but under new drafting, is a landmine which may prove even more onerous than its partner legislation enacted in Europe.

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