The Chinese government is reportedly imposing a naphtha consumption tax on domestic supply, intercompany transfers, and designated direct-supply transactions. Market reports vary on the policy details, and the tax does not seem to have been finalized at the time of writing. The Chinese tax bureau has not issued an official notice; however, it is generally agreed that the tax will apply only to merchant naphtha and will not affect naphtha used to produce ethylene and aromatics.

This insight reviews current assumptions about the new policy, the consequences for mainland Chinese crackers, petrochemical companies’ strategies to minimize cost constraints, and the potential impact on feedstock markets, from naphtha to LPG.