BASF opens huge factory in China

Germany’s BASF, the world’s biggest chemicals producer, on Thursday opened a new €8.7 billion ($10 billion) production complex in Zhanjiang, China, the company’s largest investment ever.

This move is controversial on two fronts.

First, it comes as the company outsources German jobs to India and China. Second, it raises concerns about supporting China’s Communist Party at a time when Berlin urges companies to “minimize risks.”

Domestically, BASF has implemented drastic cost-cutting measures, resulting in firings in Ludwigshafen, where the company is headquartered, as well as its Berlin office. BASF has long argued that expansion in China, the world’s largest chemical market, is essential to its future profitability.

The new facility in southern Guangdong province brings together several chemical producing units and covers an area of ​​about four square kilometers (1.5 square miles).

Speaking to Germany’s financial daily Handelsblatt This week, BASF CEO Markus Kamieth said, “China remains the market offering the greatest growth for our industry.”

“The strong focus on new industries, renewable energy and the green transition is a huge opportunity for an innovative chemical company like BASF.”

Germany’s chemicals industry is struggling to remain competitive with China, with BASF citing high energy and labor costs as well as regulatory burdens.

Additionally, the move is controversial as BASF’s investment comes at a time when Berlin has urged companies to “reduce risk” through diversification.

So far, German companies – like VW, for example – have tended to choose the potential short-term profit opportunity in China rather than worry about Chinese trade practices and the communist-led economy.

In addition to far looser environmental regulations, labor laws in China also help big companies’ profits.

However, the situation is not without risk.

Last year BASF was pulled out of two joint ventures in the Xinjiang region after its local partner was accused of engaging in rights abuses against local Uighurs.

BASF says more than 2,000 people are employed at the Zhanjiang site.

They will produce a range of chemicals for sectors ranging from transportation to consumer goods and electronics, with the majority of products being manufactured on site for the Chinese market.

Zhanjiang is BASF’s third largest campus worldwide, after Ludwigshafen and Antwerp, Belgium.