ISSUE 60September

Events

ChemChina's Mid-term Results Meeting for 2012Haohua Co,. Tltd Inaugurated

1

2

3

ChemChina Gets Strategic Partnership with Shenhua

ChemChina Deputy Safety Officer Training SeminarRen Jianxin Talks with New EmployeesChemChina Lean Six Sigma Program Becomes National Benchmark

Project

4 National Chemical Information Center establishes Singapore PartnershipBluestar Chenguang Institute Getting International CertificationQenos Experts Review Xinghuo Plant's SHE ElementsHaohua Honghe Sets up Chief Technologist Positions

Employee World

7 We Are Family ()

Technology

5 Oxygen Cathode Ion Membrane Electrolys is Technology DevelopedHaohua Yuhang Gets Chlorine Alkali Technology Recognition

6 Southwest Chemical Research Institute Alcohol Production Gets ApprovalYuxing Chemical Gets Five National PatentsChangyi Petrochemical Patents Single-gas Water Scrubber

8 We Are family ()

ISSUE 60 EVENTS

September 2012 1

ChemChina's Mid-term Results Meeting for 2012

Haohua Co,. Tltd Inaugurated

Chai Yutian

The China Haohua Chemical (Group) Co Ltd had its inaugural ceremony in Beijing, on August 8, with ChemChina's president, Ren Jianxin, and China Everbright Group's Chairman, Luo Zhefu, on hand to introduce the plans for the new company. Also on hand were ChemChina's vice-president, Yang Xingqiang, and China Everbright's vice-president, Wu Shaohua, who spoke about how the new China Haohua Chemical was established. Haohua's president Hu Dongcheng said they intended to build one of the most outstanding companies under the ChemChina banner and to create safe, sustainable economic and social development of the industry focused on science and the future.

Continued on next page

ChemChina held a mid-term results meeting on July 28 to review its performance in the first half of 2012 and take a look at the current situation to plan future activities. ChemChina president Ren Jiangxin attended the meeting and delivered the keynote speech.

ChemChina vice-president, Yang Xingqiang, reported on "Cutting costs and improving efficiency for the next half", and gave a review of the performance of the past six months in priorities, production analysis, and problems with production. In the first six months, the company

recorded total income of 103.18 billion Yuan ($16.25 billion), a YOY increase of 20.8 percent. In facing daunting challenges ahead, Yang noted, all the ChemChina companies are expected to do everything they can to reduce consumption and costs, and improve efficiency with a shared goal of marketing better, turning losses into profits, improving management and production-line safety, and promoting energy conservation and emissions reduction.

Ren spoke further on the priorities in the second half, to clarify them in light of current conditions and pointed out that ChemChina ranks 402nd on the recently released 2012 Fortune 500 list, as opposed to the 475th in 2011. And he identified some problems, in spite of the company's remarkable achievements. One major challenge for the organization in the second half, he noted in summary, is the excessively high asset-liability ratio in relation to the

growth scope and amount of debt. He urged all ChemChina companies to keep a clear internal and external picture and stable operations through supply-chain optimization and market development. Another area needing close attention, in a coordinated way, is business efficiency and value creation in pursuit of company goals. Two more areas are the restructuring of certain businesses, especially those with financial difficulties, and making the company world-class by putting people first and developing harmoniously.

September 2012 2

ISSUE 60 EVENTS

Continued from page 1

The new Haohua Group, jointly established by ChemChina and the Everbright Financial Holding Assets Management Co, with assets of 21.88 billion yuan ($3.44 billion) and 19 subsidiaries, including six high-tech companies, and special fluorine chemical, chlorine alkali chemical, and fine chemical companies.

The company was founded in 1992 under the name China Haohua Chemical (Group) Corp, a wholly owned subsidiary of ChemChina. Over the years, it has built a unique, advantageous value chain and technical expertise in the chemical industry with innovation and management improvements. Through various means it has grown

financially and has developed a considerable customer base to become one of China's leading chemical manufacturers, with distinct primary businesses, remarkable technical ability, and strong competitiveness. Its main line of business is basic chemicals, with caustic soda, PVC, urea, methanol and acetic acid accounting for the majority, supported by technical innovation.

The Haohua Group is essential to ChemChina in strengthening capital operations, IPO, and sustainability. It is striving to secure more than 40 billion yuan in assets in the next three to five years, with annual sales above 30 billion yuan and profits of over 3 billion yuan, and is keeping its eye on getting listed.

ChemChina Gets Strategic Partnershipwith Shenhua

ChemChina signed a strategic partnership agreement with the Shenhua Group Ltd on Aug 17, which was attended by the Shenhua Group's president, Zhang Xiwu, and ChemChina's president, Ren Jianxin. The strategic partnership agreement was signed by the China Shenhua Energy Co's vice president, Wang Jinli, and ChemChina's vice-president, Yang Xingqiang. At the ceremony, Shenhua Marketing Group's vice-president, Hao Yan, and the head of ChemChina's Operation Department, Bai Yiping, signed a coal supply agreement for 2012-2014.

The partners will cooperate along the length of the value chain, in energy, manufacturing and other strategic fields for mutual benefit, resource sharing, and co-development. The first step involves the strategic coal supply arrangement, where ChemChina uses a centralized method to purchase coal from the Shenhua Group who regards ChemChina as a strategic client. At the same time, ChemChina will assist Shenhua in its strategic goal of becoming a global coal supplier through its global storage and logistics. It will supply coal to ChemChina in various locations using an inventory management approach. The cooperation will then extend to various related strategic sectors such as warehousing, logistics, joint marketing, new technology in coal chemicals, and new energy and materials, for mutual benefit and full use of respective

resources and operations. The partnership will also involve cooperation in market development, enterprise management, talent exchanges, and digitalization.

The Shenhua Group is a large energy supplier that deals with production, transport, and marketing of coal, electricity, railways, ports, coal-to-oil conversion, and coal chemicals.

Teams from the two partners will meet quarterly to review their results, share information, improve services, and achieve strategic cooperation.

September 2012 3

ISSUE 60 EVENTS

ChemChina Deputy Safety Officer Training SeminarZhu Xiaolei

Ren Jianxin Talks with New Employees

ChemChina Lean SixSigma Program Becomes

National Benchmark An Chuyu

ChemChina held an opening ceremony, on July 24, for a four-month training seminar for deputy safety officers, with 58 outstanding frontline safety managers from across the organization taking part. They will get systematic training in safety theory, safety management, and practical safety operation and attend lectures on safety management, and take part in discussions and field trips that combine theory, knowledge, and practice. The purpose of the seminar is to develop a group of highly competent safety management specialists for the company.

ChemChina's president Ren Jianxin attended the 2012 new employee induction ceremony, on Aug 9, and spoke with the 49 new comers by reviewing the industrial situation from a strategic point of view, the company's position in the industry, and the challenges that lie ahead. He outlined the roadmap for development by starting with its history, giving the current situation, and the 12th Five-year Plan and emphasized corporate values and the importance of being down to the earth and keeping a low profile. He said he expects them to make progress in their careers by first learning to give.

When the Ministry of Industry and Information Technology organized a q u a l i t y b e n c h m a r k p r o g r a m , ChemChina's lean six sigma approach to continuous improvement was singled out as a quality benchmark by a panel of experts. This is the only quality benchmark chosen for the petrochemical industry. Since its continuous improvement drive began in 2009, ChemChina has saved nearly 1 billion yuan ($160 million) in revenues through black belt, green belt, and yellow-belt projects and onsite improvement activities. More important, leadership and project personnel at all ChemChina companies learned to accept a science-based management approach and advanced management culture, and became better at using data and facts in business management, achieving remarkable results in product quality and professional ability.

September 2012 4

ISSUE 60 PROJECT

National Chemical Information Center establishes Singapore

Partnership

Dong Shuping, Zeng Shengnan

Bluestar Chenguang Institute Getting International Certification

Yu Guanghua

Qenos Experts Review Xinghuo Plant's SHE Elements

Du Yanqing

Haohua Honghe Sets up Chief Technologist Positions

Wu Ling, Wen Dijia

During the 2012 China Petrochemical Industry Conference, on July 19, the China National C h e m i c a l I n f o r m a t i o n C e n t e r s i g n e d a memorandum of cooperation with the Singapore Manufacturers' Association, while announcing a global strategic partnership.

In recent years, petrochemical trade between China and Singapore has increased 52 percent year-on-year, from S$890 million ($713.66 million) to S$1.35 billion and Singapore has become China's second largest petrochemical trade partner in Asia, while China has become Singapore's largest destination for investment.

According to that strategic partnership, cooperation between the two is expected to be extensive and to better serve Singaporean investors and traders in China.

To promote its exports and marketing, the Chenguang Institute recently held a meeting to study the feasibility of becoming REACH registered and getting TS16949 international automobile quality and technical certification. Both management and marketing personnel at the institute agree that they need REACH registration so the engineering plastics department can export its red phosphorus flame-retardant matrix materials to EU countries. And the TS16949 international automobile certification is very important for getting its automotive products on the market.

The institute has chosen the department and personnel to run the registration and accreditation effort, and has drawn up a timetable and is making the necessary preparations to get the job done as soon as possible.

A panel of SHE experts from Qenos, BV Consulting, and Bluestar was in Xinghuo Organic Silicone Plant for a week-long SHE element review from July 30-Aug 3.

They examined five elements of the plant's SHE program (SHEOP9.1 incident reporting, analysis and tracking, SHEOP8.1b contractor management, SHEOP6.2 work permit, SHEOP5.1 employee safety, SHEOP1.1 management, leadership, commitment and responsibility) on site, in interviews with employees and managers, looking at materials and records, and concluded that the five elements were being effectively implemented.

Technician Zhao Chunmeng, of Haohua Honghe Ltd, and Wang Huajian, a senior fitter and technician at Fine Chemicals Co Ltd, received letters of appointment as chief technicians from general manager Xie Xuerui, on Aug 7. This means their salaries will be equivalent to that of a chief engineer, and will be a chief operator and chief fitter, respectively.

Haohua Honghe began its program of selecting chief technicians, in May 2011, and set up an evaluation committee and two specialized teams to choose the chief chemical operator and chief fitter, in the first round of evaluations. Since the selection process began, nine operators and five fitters have been recommended, from production plants and subsidiaries. There was a written exam on July 26 and a skills test on Aug 16, with Zhao and Wang coming out on top through a series of open evaluations.

September 2012 5

ISSUE 60 TECHNOLOGY

In the chlorine alkali equipment business, reducing power consumption by the electrolytic tanks is a major topic of conversation, and a new form of oxygen cathode technology is getting a lot of attention because it cuts power consumption substantially. Bayer, Wood GmbH, and Denora are reported to be developing this technology, while Bluestar Beijing built a 5000-t/a oxygen cathode electrolytic tank, a world-class device in technology and scale, in collaboration with Beijing University of Chemical Technology.

Bluestar Beijing invented a way to prepare a metal nano-particle composite catalyst using nano-carbon material, and developed an oxygen cathode electrode suitable for chlorine alkali electrolytic production, by teaming up with Beijing University of Chemical Technology. It removes a core barrier to the development and manufacturing of

industrial-scale oxygen cathode ion membrane electrolytic tanks. Bluestar Beijing is the first Chinese company to make such a breakthrough. This can lower electrolysis power consumption in China's chlorine alkali industry by about 35 percent.

China's first 5000-t/a oxygen cathode ion membrane electrolytic tank prototype was built in the ChemChina electrolytic technology industrial park of Dahua Huanghua Chlorine Alkali Co Ltd, in Cangzhou, Hebei province. It passed a 72-hour assessment organized by the China Petroleum and Chemical Industry Federation, on June 30, 2012, with all indicators meeting the design requirements, especially the 35-percent reduction in power consumption per ton of alkali electrolysis. Bluestar Beijing is in talks with several domestic chlorine alkali companies on a larger industrialization demonstration project.

Oxygen Cathode Ion Membrane Electrolysis Technology Developed

Haohua Yuhang Gets Chlorine Alkali Technology RecognitionShua Xuxiang, Liu Juan

The technology for the use of sodium hypochlorite liquid effluent, developed by the Haohua Yuhang Co Ltd, has won two Henan provincial government awards for technological achievement. The first was for a saltwater de-iodination project in membrane caustic soda production, done in cooperation with the Henan University of Technology. The purpose of the project was to reduce the iodine content in saltwater entering an electrolytic tank, because the iodine in saline water will shorten the service life of the ion membrane caustic soda production process. Therefore, this can prolong the service life of the ion membrane and cut the production costs of caustic soda. No Chinese chlorine alkali company has ever had saltwater de-iodination technology. In early 2010, Haohua Yuhang brought the iodine content in saline water, using a reduction blow-

off process, from 0.6 mg/l to 0.2 mg/l and meeting the ion membrane requirements. This technology promises considerable economic returns, since one additional year of service life can generate 7-million yuan ($1.1 million) for a 300,000 t/a ion membrane caustic soda plant. The other award was for the use of sodium hypochlorite liquid effluent. This uses sodium hypochlorite effluent from the chlorine alkali industry to replace primary water in preparing fresh sodium hypochlorite solution for secondary formulation instead of primary formulation, increasing the sodium hypochlorite recovery rate through the use of aeration devices and temperature reduction measures. This technology is safe and reliable and environmentally and economically beneficial. In a 300,000 t/a PVC plant, it can cut COD emissions by 70.4 t/yr and primary water consumption by 288,000 t, for savings of 460,000 yuan.

Alarge pressurized dry coal dust gasification furnace manufactured by the Bluestar Machinery (Sichuan) Co,. Ltd recently delivered to the customer is the first of its kind to be made in China, and can significantly cut costs in comparison to foreign counterparts. It has a carbon conversion rate of up to 99 percent, which helps promote the localization of large gasification equipment and provides proprietary technological support for China ' s coal chemical industry development.

The photo shows the furnace being shipped out of the factory. Photo by Tang Anshu.

September 2012 6

ISSUE 60 TECHNOLOGY

Changyi Petrochemical Patents Single-gas Water Scrubber

Liu Bin, Xu Aiyong

An alcohol production process using acetic acid esterification and hydrogenation that the Southwest Chemical Research Institute developed has passed a Sichuan provincial Department of Science and Technology assessment, in Chengdu. The panel of experts concluded that the equipment used in the project is technologically advanced, while the catalyst performed extremely well. The product proves to meet GB/T678-2002 requirements and its emissions meet treatment standards. This technology marks an

Southwest Chemical Research Institute AlcoholProduction Gets Approval

Yao Lu

improvement in Chinese technology in this field and replaces a conventional approach using grain-fermentation-based alcohol production. It also solves a major problem of overcapacity in China's acetic acid industry and paves the way for the industry to produce downstream products with great market potential and demand. In addition, it helps meet the needs of emerging industries, helps the technological development of China's alternative energy industry, and has remarkable benefits for alternative energy sources, energy conservation and environmental protection.

Yuxing Chemical Gets Five National Patents

Chu Yuhui

A multi-media filter backwash process that Jinan Yuxing Chemical Ltd developed has received a national invention patent from the State Intellectual Property Office. In addition, four of its other developments -- a fueling device for use with a Raymond mill; a packaging machine; an automatic pressure stabilization device for instrument wash water in titanium white powder production; and a steam pipe that can be placed in corrosive chemicals in the chemical production process -- received utility model patents from the IP office. This was a company record for the number of patents received in a single year.

The titanium white powder process has demanding standards for water quality, and the multimedia filter is the first-stage in the pretreatment process of a desalination station. The quality of the water discharged from the filter has a direct bearing on the operation and production costs of a desalination station. The company's filter backwash process can help shorten the sedimentation time, reduce filtering material loss, and improve the quality of the water generated through a fully automated process, resulting in a 50-percent increase in efficiency. The other technologies also provide good technical support for improving the company's productivity and bring considerable economic benefits.

The company has a total of 10 patented technologies.

Changyi Petrochemical has received a national utility model patent on its single-gas water scrubber, an auxiliary protective device for acidic water storage tanks. It can absorb toxic, harmful gases and avoid damage to acidic water storage tanks from excess pressure and prevent toxic gases from being released into the air.

A nitrogen seal can prevent the formation of explosive mixtures in these tanks, and the spontaneous combustion of ferrous sulfide, but if the gas pressure reaches a certain level in the water-sealed tank, it breaks the seal surface and discharges into the air. And, while this can prevent damage to the tank from excess pressure, thereby protecting the equipment, a large amount of toxic gas is released into the air and, since this kind of gas is heavier than air, it can be extremely harmful to any workers nearby and to the surrounding environment.

Changyi Petrochemical spent more than a year developing its single-gas water scrubber, also referred to as a deodorizing column, which is connected directly to the gas discharge line on the top of the tank. It consists of upper and lower sections and can absorb most of the sulfureted hydrogen for recycling.

After being put into use and undergoing an assessment, the technology was found to meet all the necessary toxic gas absorption requirements, the company applied for a national utility model patent. This device is the first of its kind to be built in China and is already in wide use in the industry.

September 2012 7

ISSUE 60 EMPLOYEE WORLD

We Are FamilyJuly 20 was the opening day of the Bluestar Summer Camp, for the next generation of Bluestar people. This year, more

than 1,200 children from 11 countries joined the summer camp, in 24 Chinese cities, and were able to spend 20 happy days together, working and playing in groups. The lyrics of Bluestar camp's song are the same as the pop song, "We are family".

Chinese children joined those from overseas for cultural exchanges, each in their own language and in their own way, over the 20-day period and got to know each other better and develop friendships, in the same way that their parents do while working for Bluestar around the globe.

The campers of the Jiangxi division created encaustic (heated wax colors) paintings and landscapes, which made them more artistically aware and gave them greater exposure to the joys of doing something themselves.

Aug 2 was press day for this 23rd annual Bluestar International Summer Camp, with more than 20 media representatives on hand to cover the activities at the Beijing division's No 1 campsite. They were fascinated by the themed activities and by Bluestar's success in organizing the summer camp for its employees' children for more than two decades.

The photo shows journalists with campers "broadcasting" the London Olympics on the spot.

The campers of the Nanjing division played games together and introduced themselves, and thought, "Don't be shy, we're all friends - let's learn from each other". F a c i l i t a t o r s a t t h e

Yima Campsite dedicated themselves to taking good care of every camper, from the beginning to the end.

Campers of the Shanxi division played a game called "All in the same boat", in an attempt to show their parents their improved selves after the summer camp ended.

The Jiangxi division got its campers involved in trying some ancient archery techniques to build their willpower and confidence.

September 2012 8

ISSUE 60 EMPLOYEE WORLD

We Are family

On Aug 9, a thrilling closing ceremony for the 23rd Bluestar International Summer Camp was held at the Beijing Olympic Center Stadium, with Chinese and overseas campers from the Beijing division putting on a wonderful show. ChemChina's president, Ren Jianxin, spoke for the occasion, in the company of ChemChina HQs and subsidiary leaders and the parents of the campers.

Ren spoke of how well the camp had been organized and said he appreciated the painstaking effort made by camp facilitators and instructors. He gave a review of the Summer Camp's 23-year history, from the original, simple idea of giving employees peace of mind to its being a part of Bluestar corporate culture and a token of ChemChina's commitments to corporate responsibility. It has grown from a mere six-person camp into an international gathering of 1,200 campers from 11 countries, and it has spread out from the city of Lanzhou in western China, to 24 cities across the country.

The evening began with an impressive laser dance, followed by wonderful performances by the campers and some professional entertainers, including Happy Together, Endless Love Tonight, Beside You, and a solo saxophone rendition of Ave Maria. The performers charmed the audience with a stream of wonderful songs and dances, a pop show, a magic dance Legend, and acrobatics performed by professional entertainers, drawing screams of appreciation. This year's summer camp coincided with the London Olympic Games, so a number of sports elements were added to the show, including basketball, martial arts play based on the film Kungfu Panda, and military sports boxing. The show was a succession of climaxes with wonderful performances and received continuous applause. Rubik's Cube, a PK show involving campers from division 1 and division 2, pushed the whole event to a climax. And, finally, the curtain fell on a perfect Bluestar Summer Camp as all the campers sang the theme song, Under the Blue Sky, together.