Sanfangxiang, a veteran polyester bottle chip producer, has accumulated losses exceeding 1.6 billion yuan over three consecutive years, with its controlling shareholder's equity frozen and its annual report receiving a 'disclaimer of opinion'. This situation is a stark microcosm of the severe overcapacity plaguing China's PET bottle chip industry.
The Inevitable Cost of Overcapacity
According to industry public data, China's domestic PET bottle chip capacity surged past 20 million tons per year between 2023 and 2024, while actual demand stood at only 12 million tons. This supply-demand mismatch has crushed product spreads and rapidly eroded industry profits. After acquiring Hailun Chemical for 7.35 billion yuan in 2020 and shifting its core business from textile printing to PET bottle chip and PTA, Sanfangxiang briefly enjoyed profits—630 million yuan in 2021 and 818 million yuan in 2022. But since 2023, it has been in a downward spiral, losing 487 million yuan in 2024 and 885 million yuan in 2025.
More critically, Sanfangxiang's value chain only covers the PTA-to-PET bottle chip segment, leaving it entirely dependent on external purchases for its core raw material, PX. This lack of vertical integration leaves it with almost no buffer when upstream prices rise.
Dual Pressure from Debt and Guarantee Risks
Beyond operational losses, Sanfangxiang faces severe debt guarantee problems. As of the latest announcement, its overdue guarantee obligations for subsidiaries have reached 522 million yuan, accounting for 10.82% of its most recent audited net assets. Its wholly-owned subsidiary, Hailun Petrochemical, has defaulted on financial lease payments, adding to the company's financial strain.
Even more alarming is the related-party transaction risk. As of end-2025, the company's accounts receivable from related parties stood at 3.561 billion yuan, yet only 107 million yuan in bad debt provisions had been set aside. Auditors explicitly stated they could not obtain sufficient evidence to assess the recoverability of these amounts. The controlling shareholder's shares are under judicial freeze, and any forced disposal could trigger a change in control, shaking the trust of supply chain partners.
Can Anti-'Involution' Policies Be a Turning Point?
In the second half of 2025, Chinese authorities convened a symposium with leading PTA and bottle chip producers to discuss industry operations and projects under construction. Against a backdrop of severe supply-demand imbalance and razor-thin margins, the meeting was widely seen as a signal to curb 'involutionary' competition. In Q1 2026, Sanfangxiang posted a net profit of 32.74 million yuan, returning to profitability partly due to a price rebound in the polyester chain triggered by the Strait of Hormuz disruption.
However, returning to profit does not mean the crisis is over. Lianhe Credit Rating has downgraded Sanfangxiang's long-term credit rating to A- with a negative outlook. The controlling shareholder's equity auction has been postponed due to an execution objection, but the sword of Damocles still hangs over the company. Whether the anti-'involution' push can truly take effect depends on whether leading firms voluntarily curb new capacity and whether outdated capacity can be phased out orderly.
Ripple Effects Up and Down the Supply Chain
Sanfangxiang's plight is not an isolated case. The overcapacity in PET bottle chips is a consequence of the past few years' rush by polyester giants to expand into upstream PTA. While this 'full-chain' model has strengthened the resilience of top players, it has also intensified competition in intermediate segments. For small and medium-sized polyester chip and chemical fiber enterprises that lack captive raw material supply, survival in a price war is nearly impossible.
From a foreign trade perspective, China's PET bottle chip exports have been growing, but overseas markets are also erecting anti-dumping barriers. If domestic overcapacity cannot be absorbed by exports, it will further depress domestic prices and squeeze margins across the entire chain.