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PERSPECTIVES


Q&A with Accenture's Jerry Palmer, Managing Director - Chemicals

Just back from living in Shanghai, Jerry Palmer discusses the chemical industry in China.
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You recently returned to the United States after living in Shanghai for three years to lead our chemicals practice in China. How would you describe your experience living there?
I started my journey at Accenture nearly 25 years ago in Columbus, Ohio, and the 22 year-old “me” could have never imagined living and working in China. It ranks as one of the highlights of my professional career.

We hear about a “new normal” in China. What does that mean?
Regardless of the metric picked—be it country size, population, number of connected devices—China is huge. And, for 20 years the economy has been growing 9.5%1 annually on average, making it now the second largest economy in the world.

But China is changing. Growth has decelerated to around 7%2. There is an urbanization movement going on, with people moving from rural to urban areas. There is a growing middle class and changing consumption patterns. This change is being referred to as the new normal. Multinational and local companies alike are finding that transformation is needed to adapt to this new normal and succeed in China.

Describe the main issues currently facing the chemical industry in China.
There are really four key areas that are impacting the industry today.

  • Complexity: The chemical industry in China is extremely complex and fragmented. You see a mix of state-owned entities, private local companies and multinationals. Furthermore, while the government is using regulations to drive consolidation, there are still roughly 25,0003 domestic chemical companies in Greater China.

  • Rising Costs: Costs are rising in many areas—including labor, raw materials, energy, facility maintenance, and new plant construction. The combination of these escalating costs and ongoing low productivity in many organizations is driving concerns around the long-term competitiveness of China and the global chemical economy.

  • Overcapacity: Overcapacity comes as no surprise with 25,000 chemical companies all producing some of the same things. Nevertheless, slowing demand and overcapacity mean that inventories are increasing, and some products probably won’t correct themselves in the local economy for another five to 10 years.

  • Sustainability: The focus on sustainability has notably increased, particularly given the health and environmental challenges associated with coal-based chemicals that are prevalent in China. As proof that progress is being made, the China Petroleum and Chemical Industry Federation (CPCIF) recently signed onto the Responsible Care Global Charter.

What opportunities are being created given these current industry dynamics?
The issues I outlined above absolutely create opportunities. First, there is innovation. For example, there is a focus on innovation in research and development (R&D)—things like developing products in China for China.

Secondly, the “Made in China 2025” program is creating exciting opportunities. This new government program is designed to enhance competitiveness in manufacturing by promoting innovation, quality and green chemistry as well as nurturing talent.

The “Internet Plus” program is also creating opportunities. The premise of this program is that everything should be digital in one way or another. As such, it is focused on the digitalization of China as a country, as an economy, and as a culture.

Lastly, there is the “One Belt, One Road” program. This is a massive undertaking designed to build out a network of roads, rails and pipelines across over 60 countries in Asia, East Africa and the northern Mediterranean Sea.

What was one of your favorite experiences living in China?
Personally, I love to compete, and my competition of choice is the Ironman distance triathlon. Living in China provided me with the opportunity to compete in China and throughout Asia. It was really a once in a lifetime experience.

How did living in China impact you both personally and professionally?
I became much better at communicating. Living in a place where you don’t speak the language forces you to be creative in how you communicate with others. Fortunately everyone in China is so connected that much of the communication could happen through SMS, pictures or quick translation.

What are you enjoying most about being back in the United States?
My wife and I enjoy being back with our close friends and family, but we also miss our many friends in China. We are certainly enjoying the abundant sunshine and blue skies in Houston.

1“China’s Economy: A remarkable transformation,” OECD Observer.
2“China sets 2015 growth target at 7%,” BBC News, 5 March 2015.
3National Development and Reform Commission (NDRC)