All polymer production in China is known to be deficit when compared to their demand. It was reported that China produced 5.03 million tons and consumed 7 million tons of PVC in 2004 bringing the gap to 1.97 million tons. High consuming sectors like chemical, building & construction and consumer products exerted a demand on PVC and the market for the resin grew. 2006 will see production shooting up very sharply to more than 11 million tonnes against demand of 8.5-9 million tons. It seems that PVC is the first polymer whose production in China would exceed domestic demand in 2006.

This rise in production can be attributed to an increase in the number of producers from 70 to 90 in 2006, mostly small regional players. This is evident from the fact that producers with over 200 KT capacity have a 35% share in production. This dispersed industrial distribution and low-level repetitive construction has led to low competitiveness. Unhealthy competition among exiting enterprises led to a fall in prices causing an increasing number of enterprises to be in the red, coupled with an increase in foreign investment for setting up PVC plants that caused many problems. The blind expansion led to an excessive production capacity of PVC.

China implemented an anti-dumping policy towards products from the United States, Korea, Japan, Russia and Taiwan in 2003, which gave enterprises the chance to recover. 

Production capacity has been affected by factors including raw materials, technology and energy, but the heated construction has not yet cooled down. Some regions and enterprises plan to double production capacity in the next 3-5 years, ignoring the production conditions. Many domestic producers in central and western China are planning to build new PVC production bases. Dalad Banner, Jungar Banner and Otog Banner, the calcium carbide production bases in north China's Inner Mongolia Autonomous Region, plan to build 500,000 to 1,000,000 ton PVC production unit. Work on construction of the first phase 400,000 ton PVC project launched by Shenhua Group has been started in Inner Mongolia.

The industrial technology used by the PVC sector includes ethylene, calcium carbide and dichloro ethane cracking. Dichloro ethane cracking is the most advanced, but the feedstock needs to be imported, so Chinese enterprises seldom adopt this technology. Ethylene technology is mature and is adopted by most foreign enterprises, but it takes oil as its raw material, so the production cost are bound to become higher with the rise of oil price due to the tight supply. Some middle and western provinces and autonomous regions with large output usually adopt production method using calcium carbide. The production cost is lower than the ethylene method, and the proportion of enterprises adopting the calcium carbide method rose from 56% in 2003 to 70% in 2004. From the new 3.1 million production capacity in 2005, 60% of enterprises adopted the calcium carbide method; and the proportion will continue to rise in the future.