Anyone who pays any attention to the business pages will be aware that the Chinese stock exchange has got the jitters. Prices are tumbling (they fell 7% in a single day last week) and that has resulted in desperate measures, including the halting of trading in Shanghai and a drop in value of shares in markets in the rest of Asia, the Americas and Europe. However, whilst this might be terribly serious news for stock market traders, what does it mean for chemical traders? Will China’s stock market crash affect the chemicals industry?

According to Prof Sebastian Heilmann, Director of the Mercator Institute for China Studies (MERICS) in Berlin, the fall in share prices in China is not as serious as a fall in share prices in say, New York. This is largely because China’s stock market is much, much smaller than Wall Street and therefore has less influence over the economy as a whole. As he explains, “China’s stock markets have never been a direct reflection of how its real economy is performing. The Chinese government has rather chosen to use them as a means of raising capital for often debt-ridden state-owned enterprises. However, if neither the stock markets nor banks can serve as a reliable source of capital for major enterprises any longer, then this will have a decidedly negative impact on the growth of the Chinese economy.”

Logic dictates that if the Chinese economy suffers, then the chemical industry will also feel the pain, but global economics is not that simple, and this could be great news for chemicals traders.

As Jean-Francois Tremblay, Senior Correspondent in Hong Kong for Chemical Engineering News reported recently, “Opinions among chemical industry executives vary, but the general view is that although China has several symptoms of economic illness, the country remains a promising market. And in several business sectors, opportunities still abound, even in the short term.”

Albert Heuser, president of BASF in China and Taiwan, agrees, stating how China is still far from falling into a Great Depression. He said, “China is absolutely still the key market in Asia, both for BASF and for the industry overall. It’s true that the growth rates have been slowing down, but you have to remember that last year, China’s GDP growth was more than double the entire GDP of the Philippines.”

So the fact remains, that whilst stock prices may fall, you are better off worrying what this will do to your own share portfolio or pension pot, because the rest of the data on Chinese chemical demand still indicates great opportunities for chemical traders and manufacturers.

Or can economic data be misleading?