China's pesticide formulation exports about to boom backed by increasing tax rebates

China’s manufacturers are mainly exporting pesticides technical in international markets, due to the tax rebate gap between those and formulations. This issue is a long-time thorn in the eyes of China’s industry, lowering motivation for value-added processing of technical into formulations and slowing down a healthy development. Now the news getting revealed, that governmental departments are working on suggestions on higher pesticide formulations tax rebates, which, after implemented, will likely lead to a surge of exports, a better competitiveness in international markets, and new investments as well as innovations in technology.

Back in November 2016, the Chinese government revealed to increase the export tax rebates for more than 400 commodities. The idea behind that step was an improvement for Chinese exporters in the international markets. However, pesticides formulation was not included, which continued making them fall behind in preference of manufacturers to pesticides technical.
 
China was seen traditionally as a large exporter of low-value pesticides. Value-added pesticide formulations were rarely seen in international markets. However, huge enhancements in production technology and investments in pesticides formulations by Chinese manufacturers is going to switch the situation. One of the main reasons for Chinese producers to stick to pesticide technical is the higher export tax rebate of those.
 
As a fact, many overseas manufacturers have used the higher tax rebate of pesticide technical in order to negotiate low prices, process the cheap products into higher valued formulation and sell them back to China’s market. This situation has depressed Chinese manufacturers and caused calls for higher tax rebates in recent years.
 
Now, in the middle of April 2017, China’s Crop Protection Industry Association has finally released, that several authorities and departments are actively working on suggestions for an increased export tax rebate for pesticide formulations.
 
For China’s pesticides industry, a higher formulation export tax rebate is likely to boost exports and strengthen the position in international markets. In addition to that, domestic manufacturers are getting more motivated to process their pesticide technical into a value-added formulation, which enhances China’s industry. Manufacturers can expect higher profits and ensure a healthy and beneficial development. Furthermore, overseas companies may consider relocating their plants into China to profit from the benefits of the tax rebate in the mainland.
 
According to CCM’s research, the export tax rebate of pesticides technical was increased the last time in December 2014 to 13% from 9%. The rate for formulations, however, remained on 5% as it has been before.
 
The long-term export tax rebate imbalance between pesticide technical and formulations has become a large obstacle to upgrading the pesticide business and improving competitiveness in the international market.
 
What's more, the year 2016 proved a tough period for China’s pesticide exports, which fell in value as well as volume, according to market intelligence firm CCM. The country’s exports fell down by about 23% to $5.6 billion compared with the year 2015. The volume decreased by roughly 9% to 1,372,500 tonnes.

Since the year 2015, both the volume and value of pesticide exports from China have been declining, which can be explained by factors such as a high inventory of traders in many countries, the continuous low prices of main agricultural products, the strong dollar, as well as the drastically weather changes.
Of the 3.74 million tonnes of pesticides produced in 2015, a total of 1.51 million tonnes were exported (= around 40% of the total output), down 8.06% YoY, and the export value also down by 16.87% YoY to USD7.28 billion. Meanwhile, the import volume reduced by 14.20% YoY to 57,600 tonnes, with an import value of USD678.00 million, down 8.90% YoY.