BASF’s Exit from Chinese JV: A Strategic Shift Toward Sustainability or a Retreat from Growth?

The German chemical giant BASF has exited its stakes in two joint ventures in Korla, China, marking a significant move in its global strategy to rebalance growth, sustainability, and ethical concerns. The sales of its stakes in BASF Markor Chemical Manufacturing (Xinjiang) Co., Ltd. and Markor Meiou Chemical (Xinjiang) Co., Ltd. to Singapore-based Verde Chemical Singapore were finalized in April 2025, ending a process initiated in late 2023. While the financial terms remain confidential, the decision underscores a broader reevaluation of BASF’s footprint in the 1,4-butanediol (BDO) market—and its risks.

The Drivers of Divestment

The decision was driven by three interlinked factors: overcapacity in the BDO market, environmental concerns, and ethical risks tied to its partner.

First, the BDO market has become oversupplied globally, with new capacity additions in Asia and the U.S. pushing prices down. BASF’s plants in Korla, which relied on coal-derived acetylene (a “carbide-based” process), had product carbon footprints (PCF) 30–50% higher than those using natural gas or renewable energy. As the European Union tightens regulations on carbon-intensive imports and investors demand ESG compliance, these plants became strategic liabilities.

Second, media reports in late 2023 and 2024 raised allegations about the joint venture partner’s links to human rights abuses in Xinjiang. While audits found no direct violations in the joint ventures themselves, the reputational risk of association with such controversies accelerated BASF’s exit.

A Strategic Rebalance

The move aligns with BASF’s “Climate Neutral 2050” strategy, which aims to cut its carbon footprint by 30% by 2030. By exiting high-PCF assets, BASF can focus on lower-emission BDO production, such as its new plant in Antwerp using bio-based feedstock.

However, the sale also raises questions about its commitment to China, the world’s largest chemical market. BASF insists its long-term bet on China remains intact. “Greater China accounts for nearly 50% of global chemical production and will drive 80% of global growth through 2030,” said a spokesperson. The firm plans to retain its investments in other regions, including its $10 billion petrochemical complex in Shanghai.

Investment Implications

The sale reflects a sector-wide reckoning with the costs of carbon and geopolitical risks. For investors, the move could be a cautionary signal about the risks of coal-heavy assets in China, where 70% of BDO production relies on coal. Meanwhile, the shift to lower-PCF projects may align with ESG mandates, potentially boosting investor confidence.

Yet China’s chemical sector remains critical to global growth. With the Shanghai Composite Index up 22% since early 2023 and China’s chemical industry expected to grow 4.5% annually through 2030, BASF’s selective exits may be a sign of tactical refinement, not retreat.

Conclusion

BASF’s sale of its Korla joint ventures represents a calculated trade-off between short-term profitability and long-term sustainability and risk mitigation. By exiting high-carbon, high-risk assets, BASF is aligning itself with the EU’s green agenda and investor ESG priorities. However, its continued investment in China—despite geopolitical and environmental hurdles—reflects the region’s unmatched scale and growth potential.

The move’s success will hinge on whether the savings from exiting overcapacity and risks can offset the loss of near-term profits. For now, the stock’s recent performance—up 8% year-to-date—suggests markets view this as a strategic move. Yet as China’s chemical sector evolves, BASF’s ability to navigate its twin imperatives—growth and sustainability—will determine its long-term standing.

In a market where $1.5 trillion is projected to be invested in Asia’s chemical industry by 2030, the question remains: Can BASF’s selective focus on lower-PCF assets and its sustained China engagement secure its place at the table? The answer may define the next decade of the global chemical industry.