Chinese pesticide industry in post-pandemic age

It is now more than six months since the onset of the coronavirus pandemic. At present, the epidemic situation in China is been basically under containment and the economy is reopening in an orderly manner.

However, the situation worldwide has not been contained yet and the impact of the pandemic on the global economy has far exceeded expectations. As the basic assurance of agricultural production and as the stabilizer of global food security, the pesticide industry plays a particularly important role in agricultural production amid epidemic. Amid the pandemic, all countries have implemented a series of positive measures to ensure the circulation of agricultural materials. The pandemic has also impacted China's agrochemical industry to a certain extent, but it is generally controllable. There are still new opportunities for business development in the Chinese pesticide industry.

Chinese economy is gradually recovering; pesticide production is rising steadily

Globally, China has appeared at the forefront of controlling the pandemic and the recovery of the economy. China's economy fell sharply in the first quarter while in the second quarter the economy was stabilized and started to rebound, where negative growth turned into positive, with an increase of 3.2%. In the first half of the year, the Gross Domestic Product (GDP) dropped by 1.6%, which was better than what was anticipated.

In the first half of 2020, the nationwide production of chemical pesticide technical amounted to 1.075 million tons, at a cumulative increase of 1.3%. In the first half of 2020, the export volume was 708,700 tons, which was 6.06% down versus 2019. In terms of export value, the value was $3.6 billion in the first half of 2020, which dropped 15.96% year on year.

The dependence of international market on Chinese pesticides is irreplaceable

Recently, Yan Duanxiang, deputy director of ICAMA of the Chinese Ministry of Agriculture and Rural Affairs, said that the impact of the pandemic on the pesticide industry is controllable. This is reflected mainly in four aspects: firstly, the world economy is generally descending, but the overall pesticide industry is developing steadily; secondly, the dependence of the international market on Chinese pesticides is irreplaceable; thirdly, the rigid demand for agricultural means of production and the particularity of the agricultural production model has ensured that the pesticide industry would not be significantly affected by the pandemic, and fourthly, China's pesticide industry possesses the means to develop its opportunities.

Duanxiang also suggested that Chinese pesticide enterprises ought to adapt themselves to future market trends and correctly position themselves. More efforts are needed on the improvement of the management and quality to achieve economic benefits. Enterprises should make full use of the existing policies and take a confident attitude in the pesticide industry which is a high-tech industry. Meanwhile, more investment may be required based on the accumulated strength, to seize opportunities and deliver more Chinese pesticides to the international market.

New pesticide clusters are being formed

By the end of 2019, the overall operating revenue of all major enterprises in the pesticide industry was roughly Yuan240 billion, with a total net profit of roughly Yuan22 billion. The revenue and profit were the same as those of the previous year. However, a new round of production transfers and extensions had begun. The information available shows that more than 30 projects are planned to start or have started in the coming year. The total investment in these projects exceeds Yuan20 billion, most of which are distributed in Inner Mongolia, Jiangxi, Gansu, Ningxia, Sichuan and Chongqing. The new projects mainly include transfers and extensions to the existing production capacity, the combination of upstream and downstream industrial chain, as well as for upgrading of production of pesticide formulations. The new pesticide industry clusters are being formed, where the new pesticide capacity is ready to take off.

New export-only policy promotes globalization of Chinese pesticide industry

On June 8, 2020, the Chinese Ministry of Agriculture and Rural Affairs issued a statement on the registration of pesticides for export only, which are not to be used in China. The announcement is referred to as the No. 269 Announcement of the Ministry of Agriculture and Rural Affairs. The implementation of the policy is expected to greatly reduce the manufacturer’s export cost and will solve the current problem of inconsistent requirement for pesticide registration in China and overseas. The policy is a relief for export-oriented manufacturers and it will help enterprises to reduce the cost of registration and speed up the process of the market launch of the new product. The policy will also promote China's pesticide exports, alleviate the difficulties on Chinese pesticide enterprises caused by the pandemic and the trade war, and will facilitate the internationalization of the Chinese pesticide industry.

Worldwide pandemic not contained yet; new marketing model needs to be developed

The United States, Brazil and India are the major agricultural and pesticide-use countries in the world, where the pandemic is not contained yet, where the normal business and living activities are greatly affected. Agricultural production is no exception. At present, normal international business travel and business exchanges are quite restricted and the way to develop international customers through offline exhibitions has also somewhat come to a standstill.

In the face of the current difficulties, enterprises ought to actively embrace the internet, make full use of online platforms like online exhibitions to publicize themselves to businesses and enhance the development of customers online. Meanwhile, attention should be focused on the prevention of international financial risk.