In a note this week, Bank of America analysts warned that the US-China trade war is unlikely to slow China’s dominance in the chemical industry as the country continues expanding its production capacity with strong government support.
Despite tariffs and lower pricing, BofA believes China’s chemical sector will remain highly competitive in global markets.
The bank notes that China’s industrial investments have surged since its entry into the World Trade Organization in 2001, driving its net trade balance from $100 billion in 2004 to $1 trillion in 2024.
According to He-Ro Chemicals, a Chinese chemical consultancy cited by BofA, this growth has been fueled by state-backed projects that ensure high employment rates, even as China’s property market declines by 5-10% annually.
“Financial support for these projects is provided by the government, as they keep employment rates high,” He-Ro noted.
One of China’s most significant industrial advancements is said to be in auto production. “China has become the #1 auto exporter, up from #6 just 5 years ago,” said BofA, citing He-Ro.
They explained that the country’s chemical supply chains—including polymers, coatings, additives, and lithium—are now fully self-sufficient. The shift is said to have squeezed out multinational companies, with six of China’s ten largest automakers now being domestic firms.
Low operating costs have played a key role in China’s expansion, as construction and labor expenses remain well below US levels.
“Energy feedstock from Russia and Iran… [is] priced at roughly 10% below international benchmarks,” said BofA.
Looking ahead, China may strengthen ties with Europe as US tariffs disrupt global trade flows.
BofA noted that He-Ro said: “US tariffs against imports from Europe could lead to a closer relationship between China and the EU,” suggesting that China may find alternative export markets to offset trade tensions with the US.
Source : Investing