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China's petrochemical equipment manufacturing industry is at a critical juncture, with significant opportunities and challenges ahead. According to estimates from relevant departments, during the "11th Five-Year Plan" period, annual investment in petrochemical equipment reached 30 billion yuan, with total investments exceeding 150 billion yuan. The demand for such equipment totaled 2.5 million tons, including 700,000 tons of key equipment. Among these, specialized equipment like reactors, heat exchangers, towers, storage systems, heaters, and special machinery accounted for 100,000 tons, with an investment of 47.5 billion yuan.
The National Development and Reform Commission has identified 28 industries and 526 products and technologies for encouragement, including infrastructure and services. In the petroleum and petrochemical sector, three major areas were highlighted: the development of key technologies and equipment for large-scale fertilizer and ethylene plants, the production of large turbine compressors for petrochemical facilities, and the exploration and drilling of oil and gas.
As the ancient saying goes, "Heaven does not take, but it is subject to others." The ambitious development plan for China’s oil and petrochemical industry offers a golden opportunity for its equipment manufacturing sector. However, without addressing internal weaknesses and securing strong government support, the industry risks missing out on this chance. Failure to act could mean watching foreign companies reap the benefits instead.
Over the past two decades, China has made progress in domesticating major petrochemical equipment, yet it has not fully met the goals outlined in the State Council's 1983 "Decision on Grasping the Development of Major Technical Equipment." Despite over 20 years of localization efforts, the gap with international competitors has widened. Although China ranks fourth or fifth globally in petrochemical equipment output, its overall scale is only one-fifth of the U.S., one-fourth of Japan, and one-third of Germany. With more than 500 manufacturers, the industry lacks large-scale backbone enterprises, and no company has entered the global top 500.
The industry is "big but not strong," and a major cause is the lack of effective government guidance. This has exacerbated the gap between Chinese and foreign manufacturers. The oil equipment manufacturing sector suffers from disorganization, with many small companies leading to fragmented resources, capital, and technology. Over 300 enterprises are involved in the oil drilling equipment industry, with many more emerging. This over-saturation leads to inefficient competition and low-quality products.
Market limitations also contribute to disorderly competition. Limited domestic oil resources restrict market growth, but hundreds of companies still compete fiercely, often driving down prices and reducing profitability. While rising crude oil prices have boosted upstream activities, domestic manufacturers struggle to gain traction in international markets due to price wars.
Product structures are similar across companies, with few innovations. Many firms produce basic equipment, lacking distinctive features or independent intellectual property. For example, while there are dozens of steel pipe manufacturers, few achieve high-tech breakthroughs. Similarly, drilling rig production is widespread, but most units are technologically outdated.
Corporate integration remains slow. Previously state-owned enterprises were under different ministries, but today, they operate under various ownership models—state-owned, private, joint ventures, and foreign-owned. This fragmentation prevents the formation of large-scale enterprises capable of meeting future demands. Without integration, the industry cannot develop the necessary capabilities for advanced equipment manufacturing or compete effectively.
In a market economy guided by the government, the role of the state in promoting industry integration is crucial. Spontaneous market forces alone may not lead to the consolidation needed for long-term success.
Compared to the oil equipment sector, the petrochemical equipment industry faces even greater challenges. Approximately 60% of petrochemical plant technology is imported, with limited independent innovation. Process technologies rely heavily on foreign sources, and R&D lags behind project needs. Imported equipment is often re-introduced without meaningful adaptation or improvement.
Domestic manufacturers also suffer from small-scale operations, overcapacity in general equipment, and insufficient capacity for major projects. Research and development lacks professionalism, standardization, and serialization. Decentralized efforts fail to create centralized R&D hubs or construction bases.
Moreover, the absence of strong policy and financial support hinders localization efforts. Companies face high risks, and enthusiasm is hard to maintain. Frequent leadership changes and resource shortages further delay progress.
To revitalize the equipment manufacturing industry, it must align with the long-term needs of China’s oil and petrochemical sectors. Overcoming current challenges requires not only corporate efforts but also strong central leadership, coordination, and supportive policies. Localization is not just a business move—it reflects national will and safeguards economic security. Government-led institutions must play a decisive role.