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Dow Chemical wins extended trading rights
By Dai Yan (China Daily)
Updated: 2005-09-01 09:21

Dow Chemical Co has become the first foreign-invested enterprise located in a bonded zone to receive official approval to secure trading and distribution rights in China, the leading global chemical company said yesterday.

Such privileges are key to foreign companies and allow them to import products and sell directly to domestic customers, which will strengthen their hold in the market.

According to guidelines issued in April by the Ministry of Commerce, foreign-invested companies in the non-commercial sector were given trading and distribution rights but it was not clear whether they included foreign companies in bonded zones.

The issue was discussed during the China-US Joint Commission on Commerce and Trade talks held in Beijing in July; and China finally confirmed that all foreign enterprises in the country, including those located in bonded zones, could get licences to distribute goods anywhere.

Within days, the ministry and the General Administration of Customs jointly issued a circular allowing foreign-invested companies in bonded zones to acquire full-fledged trading and distribution rights in China.

"The extended distribution rights bring the company even closer to China's growing market," said Andrew Liveris, president and CEO of Dow.

Jim McIlvenny, president of Dow's operations on the Chinese mainland, Hong Kong and Taiwan, said: "We are encouraged by the Chinese Government's recognition of Dow's excellence and industry leadership, and we will continue to deliver world-class products and services in support of China's continuing growth."

The extension of distribution rights is a significant development that strengthens Dow's operations in Waigaoqiao, Shanghai, the country's largest bonded zone. Home to 8,400 foreign-invested enterprises and representing US$10.3 billion in investment, the zone handled more than US$22 billion of imports and US$8 billion of exports last year alone.

Liveris said further strengthening Dow's position in China is one of the company's most immediate priorities after he and the leadership team completed a two-day strategy meeting in Shanghai this week, in which they reviewed, among other things, future growth opportunities in China.

Liveris also disclosed that Dow had picked Shanghai as the location of a new Dow Centre.

The centre, in Zhangjiang High-Tech Park, will comprise a state-of-the-art R&D centre and a global information technology centre, as well as other support and service facilities. It will occupy more than 65,000 square metres and create 600 new jobs after it is completed in 2007.

The company did not reveal the size of the investment, but Liveris said it would be more than US$100 million.

With 10 manufacturing sites and five business centres, Dow's operations in the Chinese mainland, Hong Kong and Taiwan had US$2.2 billion in sales revenue last year, an increase of nearly 40 per cent over 2003.

China is Dow Chemical's third-biggest market, behind the United States and Germany.

"In 10 to 15 years from now, Dow's presence in China should rival our presence in our second-largest country, Germany, and in 20 to 25 years it has the opportunity to be larger than the United States," said Liveris.

He said Dow has invested over US$500 million in the country and is actively evaluating possible opportunities.

For instance, the company is looking at additional investments at its Zhangjiagang site in Jiangsu Province, where it operates latex, epoxy and polystyrene plants. Also, a coal-to-olefins pre-feasibility study is under way with Shenhua Group, the largest coal producer in China.

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