China must shut down outmoded facilities, consolidate production and reduce pollution to increase the competitiveness of its petrochemical industry, according to a guideline issued Wednesday.

Petrochemical industrial development is hindered by overcapacity along with security and environmental constraints, according to the guideline issued by the State Council, China's cabinet.

Foreign companies are to be allowed to participate in mergers and acquisitions in the sector, the guideline said.

Seven planned coastal petrochemical production bases will be built to consolidate the sector.

By 2020, energy consumption per 10,000 yuan (about 1,500 U.S. dollars) of output will be cut by 8 percent from the 2015 level, with carbon dioxide emissions and water consumption by 10 percent and 14 percent, respectively.

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