The world's largest chemicals company, BASF SE (BAS.XE) of Germany, Tuesday became the latest to target expansion in the Asia-Pacific region, saying it aims to boost investment and double sales there by 2020, focusing especially on China.

The Asia Pacific region is already the largest chemicals market in the world but is expected to grow even bigger as demand for cars, skyscrapers and highways rises along with the population's burgeoning middle class incomes. Chemicals companies are also finding that more of their key customers are relocating their manufacturing operations to low-cost countries in the region such as China.

Dow Chemical Co. (DOW) Chief Executive Andrew Liveris recently said China's stimulus package boosted purchases of building materials and consumer products such as electronics, helping the company's second quarter sales figures.

As a result, BASF and others are seeing the first signs of recovery in the worldwide chemicals demand slump in this region.

BASF said Tuesday it will invest EUR2 billion there between 2009 and 2013. It's basing its expansion plans on its own forecasts for above-average GDP growth in the region over the next decade - about 4.7% annually compared with 2.6% globally - largely driven by China and India.

It estimates the Asia-Pacific chemical market excluding pharmaceuticals has the potential to grow to EUR1.15 trillion by 2020 from EUR650 billion last year and account for nearly half of all chemical sales worldwide.

After scaling back overall production in response to the drop in demand, BASF is now at full capacity in China, while the rest of Asia is "crawling back," Martin Brudermueller, member of BASF's board of executive directors, said Tuesday during a teleconference from Hong Kong.

Analyst Heino Ruland of Ruland Research GmbH wrote in a note that BASF's push in Asia makes sense and it will outperform its European peers in the long run on the back of its ties in China.

BASF isn't alone in eyeing Asia.

Belgian chemicals maker Solvay SA (SOLB.BT) Monday said it will invest the EUR4.5 billion made from selling its drug making business to Abbott Laboratories (ABT) in high growth markets such as Asia.

And German specialty chemicals maker Lanxess AG (LXS.XE) earlier this month announced two purchases in Asia - India's Gwalior Chemical Industries Ltd. for EUR82.4 million including debt, and Jiangsu Polyols Chemical Co. Ltd. in China for an undisclosed sum.

"For years the industry from a European perspective has moved from west to east," Lanxess Chief Executive Axel C. Heitmann told Dow Jones Newswires Tuesday. "So that's exactly where we're putting our money."

Like its peers, Lanxess saw sales decline during the second quarter, but Asia was a bright spot. Sales for the period in the Asia-Pacific region jumped 74% over the previous quarter while sales in Europe, North America and Latin America improved by single-digit percentage points.

Heitmann said the company aims to generate 40% of its rubber business in Asia in less than five years, from around 30% currently. Rubber accounts for half of the company's overall sales, which amounted to EUR6.58 billion in 2008.

However, not all of Asia is rebounding as quickly as China, and Lanxess recently postponed construction of its EUR400 million butyl rubber plant in Singapore to 2014 from 2012, citing the downturn. However, Heitmann said the company is "keeping the cash warm" as it expects things to pick up there soon.

BASF, the world's biggest chemicals maker by sales and considered the industry bellwether, wants to grow an average of two percentage points faster than the Asia Pacific chemicals market each year. BASF's strategy for the next decade will be to push farther inland into emerging provinces that are benefiting from new state development incentives. The company also plans to expand in untapped markets such as Vietnam. It says it's nearing its goal of generating 70% of regional sales from local production.

It also plans to double its research and development work force in the region by 2020 to 650 and said it will hire locally.

In 2008, the Asia Pacific region contributed EUR9.3 billion to total sales of EUR62.3 billion. About 45% of Asia Pacific sales came from China and about 29% of Asia Pacific sales were plastics, the company said. In the first half of 2009, the Asia Pacific region accounted for 20% of overall sales, with nearly half coming from China. The company employed 13,700 people there as of the end of 2008.

BASF strengthened its foothold in the region earlier this year with its EUR3.8 billion acquisition of Swiss chemicals maker Ciba, which already had 55 sites in 10 countries and 2,000 employees with regional sales of EUR1 billion.

As a result, Brudermueller said BASF won't be making any other big acquisitions in the region in order to focus on the integration of Ciba.

About $1.4 billion of BASF's EUR2 billion investment will go toward BASF's 50% share in the expansion of the integrated chemical production joint venture in Nanjing, which was approved by the Chinese government in July. BASF is partnered with Sinopec in the venture and has spent $2.9 billion on the plant, which opened in June 2005.

BASF also is planning a 400,000-ton per year plant in Chongqing to produce MDI, a precursor for polyurethanes, a market it sees growing at a double-digit rate. The company expects final approval from the Chinese government this year. The BASF board of executive directors plans to approve it during the first quarter of 2010, the company said.

The expansion will add 5,000 to the regional work force by 2020 for a total of 20,000.

BASF said it has invested EUR6.2 billion in China over the last 15 years.

-By Allison Connolly, Frankfurt Bureau; +49 69 29725513, allison.connolly@dowjones.com