BEIJING, Feb. 17 -- China National Chemical Corporation (ChemChina), one of the leading producers of chemical products in China, is expected to invest US$8.93 billion into a project in Cangzhou, North China's Hebei Province.

    ChemChina has agreed to take part in Hebei Cangzhou Dahua Co Ltd by buying a 60 per cent stake in its parent company, Cangzhou Dahua Group, according to a statement released to the Shanghai stock exchange on Wednesday.

    By the end of 2011, ChemChina will invest a total of 72 billion yuan (US$8.93 billion) to build Cangzhou Dahua into one of its chemicals production bases, the statement said.

    "The acquisition of Cangzhou Dahua will help ChemChina strengthen its presence in the petrochemical products business, which is also known as the downstream business," said Li Guohong, an analyst from China Galaxy Securities.

    "The business integration will help the company reduce the impact which higher crude oil prices have caused," said Li.

    Along with the price hike of crude oil, the production cost of oil refining enterprises climbed and economic profit decreased greatly.

    Shares of Cangzhou Dahua yesterday went up 8.06 per cent to 6.7 yuan (83 US cents) in the Shanghai Stock Exchange.

    Li said, followed by its domestic rival Petrochina and Sinopec, the acquisition is an important step in the expansion of ChemChina.

    Recently several State-owned flagship companies have quickened their step in the expansion. On Wednesday, Asia's largest oil refiner Sinopec paid 14.3 billion yuan (US$1.78 billion) in cash to buy back its four listed subsidiaries.

    PetroChina bought back all the public shares of its three listed subsidiaries based in Northeast China at the end of last year.

    Li said being smaller than Petrochina and Sinopec, ChemChina is actually quickening its expansion pace.

    Earlier this year, ChemChina bought the stake in Qingdao Yellow Sea Rubber Company Limited. ChemChina plans to develop the latter into its rubber production base.

    In January, ChemChina's subsidiary, China National BlueStar Group Corporation took over Adisseo Group, the largest animal nutrition supplement producer in the world. It is the first case of a Chinese enterprise acquiring an overseas firm in the field.

(Source: China Daily)