BLOG: China’s property bailout and zero-COVID DIY will make little difference

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SINGAPORE (ICIS)–Click here to see the latest blog post on Asian Chemical Connections by John Richardson.

Polyethylene (PE) and polypropylene (PP) prices in China have rebounded on the housing bailout and tinkering with zero-COVID rules.

But in our view, these events will make little difference to the long-term economy because:

  1. The real estate rescue plan aims only to avoid major problems with developers. It does not imply a relaunch of the housing bubble, the main driver of Chinese demand growth for chemicals since 2009. A relaunch of the bubble cannot and will not happen.
  2. Due to the limited effectiveness of local vaccines, a major rollback of zero-COVID rules would be too risky. It seems likely that most rules will remain in place until 2023.

We therefore need to take a cautious view of Chinese demand for polyolefins in 2023, as we also prepare for weak growth and increased local capacity further reducing net imports.

Next year, demand for Linear Low Density PE (LLDPE) in China may decline by 6% from this year to a market of around 13.8 million tons. This would follow what appears to be a 4% drop in demand in 2022 compared to 2021.

And net imports in 2023 could fall to 3.2 million tonnes, from 4.8 million tonnes in 2022 and 5.4 million tonnes in 2021.

Editor’s Note: This blog post is an opinion piece. The opinions expressed are those of the author and do not necessarily represent those of CIHI.

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