For German giant and China, it's all in the chemistry

BASF got a very early start in the Chinese market, back to the dynastic period, and has made the country an important part of its global business

Many overseas companies have been making great efforts to understand China, and German chemical company BASF started much earlier than most. The group of Chinese the company first approached often wore blue jackets and plaited their hair.

It was 1885, only 20 years after the company got its start. BASF, then known as Badische Anilin & Soda Fabrik, sent a director named Theodor Sprosser to a distant and exotic country: China. He was to explore a potentially huge new pool of customers for its products.

Badische is the place where BASF started. The benzene derivative aniline, and soda, a sodium compound, were the two initial products, and fabrik means factory. So BASF was originally a factory producing aniline and soda at Badische.

"The management of BASF at that time wondered: could there be a market for their blues dyes, for example in the blue jackets commonly worn by millions of people throughout China, or the red colors for celebrating the New Year?" says Martin Brudermuller, vice-chairman of the board of executive directors.

"For BASF today, our activities in China are an integral part of our company. In particular, China is of increasing importance for our global R&D and innovation network."

Brudermuller was in Beijing for the book launch of the Chinese version of Breaking New Ground.

The book, which describes the adventurous path of the company and the changing chemical industry in China in the past 130 years, is also a part of the worldwide celebration of the 150th anniversary of the company. English and German versions were published in December.

Michael Grabicki, the author and former head of BASF's media relations at the Ludwigshafen headquarters, says the book will be helpful for anyone interested in China and its chemical industry.

"China is BASF's third-largest market. We are the biggest foreign investor in China's chemical industry, employ more than 8,000 people there - and we have a 130-year-old business history in this exciting country."

He spent two years scouring BASF's archives and the archives of other companies to find fascinating reports from people who worked and lived in China at the beginning of the 20th century. He also had access to minutes of BASF's board meetings and did many interviews with German and Chinese people who played a role in the development of the business.

Throughout this lengthy history, people in the China business had very similar talents, he says.

"All of them were and are creative in finding new solutions for our customers, are open to other cultures, responsible toward the environment and entrepreneurial, in order to ensure the long-term success of BASF. These talents are essential components of BASF's DNA - and have been for 150 years," he says.

Last year, as the world's leading chemical company, BASF achieved sales of around 5.5 billion euros ($6 billion) in the greater China region alone. The region, including the Chinese mainland, Taiwan, and Hong Kong, is currently BASF's third largest market after Germany and the United States. BASF's chemicals are used in almost all areas of daily life - including houses, cars, food production, pharmaceuticals, textiles, household goods and electronics.

It has invested more than 5 billion euros in China over the last 20 years - more than 7 billion euros when its partners are included - to build a locally competitive production, marketing, sales and technical service network in China.

The company also serves customers in virtually all industries and operates a production and R&D network of more than 26 sites, including its largest and most advanced integrated networks site in the Chinese city of Nanjing, together with its partner Sinopec.

Brudermuller says for BASF's future development, innovation is of utmost importance.

"One crucial learning experience from our history is that we need to develop innovative BASF products and solutions directly in China - for the Chinese market, but increasingly also for the global marketplace," he says.

Brudermuller says there are some challenges that innovation must tackle in China. First, China is becoming a more urban society. With megacities up to 52-60 million people becoming a distinct possibility for China's future, new ways of organizing cities are needed - from energy and water supply to waste management. Second, the growing population means that the planet's capacity to provide food for all is being strained. In many remote areas such as western China, a lack of sufficient food storage, a shortage of fertile land and inefficient farming practices mean that many people receive inadequate nourishment.

Moreover, the need for energy continues to grow, and energy efficiency is a key challenge for China.

Chemistry will help tackle these challenges, he says. BASF is expanding its activities in the Asia-Pacific region, and its "grow smartly" strategy will see investments of 10 billion euros and around 25 percent of BASF's global R&D staff being located in the region, a large majority of them in China by 2020.

"In expanding our strong global R&D network, we will considerably strengthen our innovation capacities in the Asia-Pacific, enabling us to better serve our customers in all industries in the region," Brudermuller says.

This year, BASF will open the second phase of its innovation campus in Shanghai, which is its largest research site in the Asia-Pacific. Starting in next year, BASF will locate the global headquarters of its advanced materials and systems research in Shanghai.

China also forms an important part of BASF's global engineering and procurement network. In China, BASF provides full management and execution services for projects not only regionally but also around the world.

Li Shousheng, Party secretary and executive vice-chairman of China Petroleum and Chemical Industry Federation, says that last year, China's revenues from the petrochemical industry reached 14.06 trillion yuan ($2.25 trillion), while the sales income for petrochemical products reached 8.76 trillion yuan.

Although the numbers are big, China cannot be considered very strong in the petrochemical industry, given that its ability to innovate is not strong enough, Li says. In the next few years, improving its innovation will be key to China's petrochemical industry.

"BASF has 130 years of experience in China and has very strong innovation capacity," Li says. "We should learn from companies like BASF and also cooperate with them more intensively in the future."

Brudermuller says BASF is exploring new methods of innovation in the company's Creator Space tour, a year-long, global event series aimed looking at coming challenges.

In Shanghai recently, the event focused on issues raised by increased urbanization. The event is a key element of the company's 150th anniversary celebration.

BASF also plans three high-level science symposia worldwide, including one global scientific conference for world-leading scientists in November in Shanghai. They say they expect to have participation from Nobel Prize winning scientists around the world.

chenyingqun@chinadaily.com.cn

(China Daily European Weekly 04/03/2015 page21)