GreenergyDaily

Sep. 9, 2025

China's plan to scale back the oil-refining industry as part of a broader push against overcapacity and excessive competition could take half a decade to make an impact, according to a major independent processor.

The initiative could require three to five years to phase out about 100 million tons of refining capacity, Li Xinhua, global head of trading at Rongsheng Petrochemical Co., said at APPEC by S&P Global Commodity Insights. "It will take quite a long time," Li told the industry conference in Singapore.

Policymakers in Asia's largest economy have been pressing on with a so-called anti-involution campaign to ease the strain on companies from aggressive competition, tackle deflation, and support economic growth. In oil refining and petrochemicals, there's a drive to phase out smaller facilities and upgrade outdated plants, while redirecting investment toward advanced materials.

Capacity reductions involve negotiations between central and local governments, and these take time as they impact employment, which is a pertinent factor given China's still-shaky property market, Li said on Tuesday.

The impact of trade tariffs, meanwhile, is that oil prices no longer reflect market dynamics, harming the financial benefit for Chinese refiners, according to Li. "That will encourage us to lower the output of oil products, while they will encourage more petrochemical production," he said.