Overcapacity in the pesticide industry is a normal feature of a market economy; the real problem lies in destructive price-cutting.

Overcapacity has been a widespread concern in the agrochemical industry in recent years. This excess capacity has fueled cutthroat competition, driving market prices for certain products below their cost of production and posing a serious threat to the sector’s sustainable development.

How should we view overcapacity? And how can we address it to ensure the industry’s healthy development?

1 Is overcapacity the fundamental issue for the healthy development of an industry?

1.1 Overcapacity is a normal feature of a market economy.  

The essential characteristic of a market economy is market competition, which ensures survival of the fittest and delivers better products and services to society. If societal production capacity equals or even falls short of demand, all goods would sell effortlessly, eliminating market competition altogether—and with it, the very notion of a market economy. Only when total societal production exceeds total demand do consumers have genuine choices, allowing high‑quality products to find buyers and enabling producers to sustain reproduction. Conversely, inferior goods remain unsold, leaving firms unable to recover capital and continue production, ultimately leading to the elimination of less efficient enterprises. Thus, a moderate degree of overcapacity is an inherent feature of a market economy and should not be cause for alarm. Such适度 overcapacity can spur firms to innovate and strive to meet consumer needs, benefiting both consumers and social progress.

1.2 Overcapacity is not the fundamental issue hindering the industry’s healthy development.  

Moderate overcapacity is a normal condition. But does significant overcapacity necessarily constitute a major problem? Not necessarily. The overcapacity we typically discuss today refers to “potential overcapacity” or “design‑based overcapacity,” meaning that, even under normal operating conditions, the production capacity exceeds what is actually being utilized. For example, in industries such as agrochemical intermediates and active‑ingredient manufacturing, plant construction and equipment investment are substantial and require comprehensive planning; companies often make long‑term investments—aiming for ten or even several decades of relevance. As a result, their designed capacities may be very large, yet this does not automatically qualify as overcapacity. Consider a rural couple with two sons who build a three‑story house of 300 square meters. They plan for each son to occupy one floor and for themselves to live on the third, but both sons are only in their teens—still far from the legal marriage age—and even if they do marry, they may not necessarily prefer living in the countryside; they might well choose to move to the city instead. Should we therefore conclude that this family’s decision to build a three‑story home represents overcapacity? After all, with two sons who will eventually start families, designing and constructing such a house makes sense from a practical standpoint. Similarly, severe overcapacity in potential terms does not usually pose a major issue. But what about actual, realized overcapacity? Does it invariably amount to a serious problem? Again, not necessarily. When I studied political economy in school, I couldn’t understand why capitalists would simply dump milk into rivers rather than lower prices or give it away free to the poor during an economic crisis. I found this behavior deeply immoral and inhumane. Only later did I realize that this was precisely the rational calculation of capitalists—they are far from foolish; the real naïveté lay with me, as I lacked basic economic knowledge at the time. If capitalists sold milk at reduced prices or gave it away for free, those consumers would stop buying milk altogether, effectively reducing aggregate demand. By contrast, dumping milk into rivers creates an ineffective supply, yet overall social demand remains intact. Meanwhile, if other milk continues to be sold at regular prices, the total revenue of all capitalists is unaffected; the only loss is the cost of purchasing and processing the milk that ends up being discarded.

1.3 Price-cutting driven by malicious intent is the fundamental issue.

If, despite severe overcapacity, all participating firms refrain from engaging in destructive price cuts, each company’s revenues would remain broadly stable, with losses confined to the excess capacity itself—resulting in only a modest impact on the industry as a whole. However, the problem arises when some firms attempt to offset lower prices by increasing volume or take the lead in slashing prices, prompting others to follow lest they lose market share. This sets off a spiral of price reductions: “You cut, so I’ll cut; you cut again, so I’ll cut deeper.” Meanwhile, aggregate demand remains essentially steady—consumers are unlikely to apply pesticides more frequently simply because prices have fallen. Consequently, the entire industry descends into chaos: revenues shrink across the board, the number of loss-making firms grows, and eventually the sector may even turn unprofitable. In such a scenario, “killing a thousand enemies while injuring oneself eight hundred” leaves no winners; this vicious cycle of price-cutting is a collective irrationality. From a societal perspective, while low prices benefit consumers, excessively aggressive price competition leaves firms unable to generate sufficient profits. Without adequate funds, they struggle to invest in new product development, pay employees, or meet their tax obligations. Over the long term, this can also stifle economic growth, exacerbate unemployment, and place undue pressure on public finances—ultimately undermining social well‑being. From the consumer standpoint, modern demand is highly diversified: there are budget‑conscious, basic‑needs‑driven buyers who prioritize low prices; middle‑class consumers who balance price with quality; and high‑end consumers who seek products that align with their self‑identity. A market that places excessive emphasis on low prices effectively marginalizes the other two segments. Thus, harmful price competition ultimately creates a lose–lose–lose situation for businesses, society, and consumers alike.

1.4 Overcapacity Still Requires Market-Based Adjustment

Regarding the current situation of overcapacity in the pesticide industry, some have proposed strengthening government oversight of production capacity, tightening approval procedures for new capacity additions, and allocating quotas to existing capacity. This view is well‑intentioned, as substantial excess capacity stems from large capital investments and represents a significant waste of societal resources. However, direct government intervention to regulate capacity would face considerable implementation challenges. Fundamentally, we operate under a socialist market economy in which “the market plays the decisive role in resource allocation.” Enterprises are the primary investors and bear responsibility for the outcomes of their investments; the government can, of course, play a supporting role. For instance, the National Development and Reform Commission’s annual Catalogue of Industrial Structure Adjustment Guidelines and the Ministry of Agriculture and Rural Affairs’ pesticide industry development plan—both policy documents—provide valuable guidance. Further measures, such as issuing sector‑specific early‑warning signals on capacity levels, could also be introduced. Yet directly intervening in the production sphere to set specific capacity targets for individual firms would run counter to this fundamental system. The lessons of the planned‑economy era—when the government directly controlled production and operations—are stark. Moreover, questions remain about who would oversee such interventions, how they would be implemented, and the myriad practical hurdles involved. Therefore, it is highly likely that addressing pesticide‑industry overcapacity will ultimately require market‑based mechanisms.

2 Can it effectively prevent the vicious competition triggered by severe overcapacity?

This issue cannot be addressed on a whim or by mere assumption. If we analyze the entire process—from product design and capacity management to sales—it becomes clear that there are, in fact, three critical control points, or “faucets.” As long as at least one of these faucets remains open, overcapacity will not trigger cutthroat competition.

2.1 The first faucet, featuring a product-designed switch

Why does vicious competition arise? Fundamentally, it stems from severe product homogenization. When products are not homogeneous—such as between Class A and Class B pesticide products—vicious competition is unlikely to occur. Even if there is some degree of substitutability between two types of pesticides, such substitution typically does not escalate into full-blown vicious competition. Therefore, during the product design phase, ensuring that the designed product is distinctive or differentiated represents the first critical step in preventing vicious competition triggered by overcapacity.

2.1.1 Avoid crowded places.

In highly competitive markets characterized by high foot traffic and intense congestion, newly designed products should strive to steer clear. If a company insists on entering such a market, it may well find itself facing severe overcapacity the very moment its product hits the shelves.

2.1.2 Think twice before heading to places everyone else wants to visit.

Sometimes a particular market does indeed hold promise, but when everyone sees the opportunity and rushes in, overcapacity quickly sets in, often followed by a sudden exodus and a messy aftermath. Entrepreneurs need to carefully assess whether they can stay one step ahead of their competitors and maintain a distinct advantage.

2.1.3 Design products with your own “special skill”

Only by ensuring that newly designed products deliver higher quality, lower costs, unique value, a competitive business model, and superior customer service—along with some distinctive “special skills”—can companies avoid cutthroat competition.

2.2 The second faucet, capacity control switch

For any individual enterprise, investments in production capacity—such as factory buildings and equipment—represent substantial capital outlays. Moreover, once these investments are made, they become fixed assets and turn into sunk costs, requiring extremely careful consideration.

2.2.1 The Question of Building or Not Building

What are the future prospects for the industry? Can challenges be addressed through collaboration, or is it necessary for companies to build their own facilities? While in-house production capacity gives firms greater control and operational flexibility, it can also become a significant burden.

2.2.2 The Issue of Determining Production Capacity

While it is certainly necessary to leave some capacity slack, a capacity plan that far exceeds future demand will only result in oversized, underutilized facilities and unnecessary expenditures.

2.2.3 The issue of commissioning versus non-commissioning

If, upon completion of capacity expansion, market conditions suddenly shift, market demand becomes constrained, and product prices have already fallen to or below cost, should production still be launched? Once operational, the additional capacity could exert downward pressure on prices, potentially driving them even lower. Whether such a move remains economically viable must be assessed rationally. To curb overcapacity and prevent destructive competition, OPEC often implements “well‑closure” measures in accordance with its agreements; some wells are left idle rather than brought online—a practice worth considering.

2.3 The third faucet, product price switch  

Overcapacity does not necessarily lead to destructive price cuts. The key lies in whether, by steadfastly refraining from such practices, the industry can forge a consensus and genuinely avoid them. This issue involves numerous factors.

2.3.1 Number of Participating Enterprises

The more competitors there are, the harder it becomes to forge a shared understanding; the stronger individual firms’ incentive to act first and seize advantages, and the more intense the cutthroat competition driven primarily by price reductions. In the household appliance sector, the first decade or so was marked by fierce rivalry and widespread price wars. Yet in recent years, large-scale price wars have become much less common—an important factor being the industry’s rising concentration, which has given rise to several oligopolistic players. These dominant firms both compete and collaborate, refraining from rash moves, thereby making full‑blown, destructive competition far less likely. This situation bears a striking resemblance to the international arena: throughout human history, the two world wars were utterly devastating, and the advent of nuclear weapons further underscored that another global conflagration would be unthinkable. As a result, the major powers have been cautious about taking unilateral action or engaging in direct conflict, even as regional conflicts among smaller states have occasionally flared up—though such skirmishes have not fundamentally altered the underlying geopolitical order. The agrochemical industry is characterized by a high degree of fragmentation, with numerous subsectors and relatively low overall industry concentration. Nevertheless, the trend toward corporate mergers and reorganizations has remained persistent. By consolidating through M&A, the number of firms is reduced, which helps curb destructive price‑cutting competition.

2.3.2 Entrepreneurs’ and Society’s Perceptions

In the early stages of Western capitalist development, price wars erupted one after another, shrouded in fierce competition, turning commercial rivalry into de facto life‑and‑death battles. As understanding of the market deepened—particularly with the emergence of multinational giants—calls from both society and businesses against cutthroat competition grew louder. Consequently, anti‑dumping provisions were introduced in international trade, and most countries enacted laws and regulations addressing unfair competition. At the corporate level, the mindset shifted from unidirectional competition to a dual‑track approach of both competition and cooperation, whereby firms come to recognize that competition and collaboration are mutually interdependent. The reliance on simple low‑price strategies gave way to differentiated, niche‑based competitive strategies. The most tangible manifestation of this shift is that today, several multinational agrochemical companies each occupy distinct market positions and cultivate unique identities, rarely engaging in price wars. In China, having embraced the market economy for only four decades, entrepreneurs’ grasp of market competition remains relatively shallow and requires further refinement.

2.3.3 Industry Self-Regulation

The healthy development of an industry requires not only regulatory oversight from government authorities but also self‑imposed standards set by the industry itself. Industry peers should come together to deliberate and agree on rules that enjoy broad consensus, thereby forming a framework of self‑discipline. Such rules are non‑binding legal instruments; they serve as voluntary guidelines that depend on the participating companies’ commitment to self‑regulation and conscientious compliance. What if some firms fail to abide? While there is no quick‑fix, coercive measures, there are still avenues for action: industry-wide boycotts. If a company breaches established norms and damages its reputation, other firms may choose to exclude it going forward—resulting in substantial long‑term losses. During the COVID‑19 pandemic, pesticide prices fluctuated daily, and one company even reneged on previously agreed terms, rendering those arrangements null and void. In recent years, the situation has reversed: downstream businesses have stopped doing business with that firm, leaving it in a dire state. By tarnishing the reputation of rule‑breakers and inflicting significant economic harm, industry‑led constraints can exert powerful influence. In developed countries, industry associations and trade alliances wield considerable clout and play a vital role in fostering self‑regulation. By contrast, China’s market has matured relatively late, and further efforts are needed to strengthen industry‑wide self‑discipline.

3 Why has the issue of overcapacity in China’s pesticide industry only emerged in recent years?

3.1 Prior to 1994, China’s pesticide market was essentially characterized by a shortage economy.

Before the founding of New China, China’s national industry was extremely weak, and a pesticide sector had scarcely taken shape. From the establishment of the People’s Republic to the onset of reform and opening-up, although Party and state leaders attached great importance to the development of the pesticide industry, the planned economy meant that enterprises produced strictly according to state‑mandated plans, resulting in severe domestic supply shortages and rendering market competition virtually nonexistent. Following the launch of reform and opening-up, the state encouraged the growth of private enterprises. A wave of grassroots entrepreneurs entered the pesticide sector, establishing businesses and driving operations. Meanwhile, foreign‑made pesticides flooded the domestic market, and the acute shortage reached a point where simply producing pesticides could turn a profit. In 1987, a prime‑time advertisement for a pesticide on China Central Television’s Channel Two left an indelible mark on those born in the 1960s: “The righteous Lufuling must kill, kill the pests!” Lufuling was, in fact, a widely used, ordinary insecticide; yet this Japanese‑origin ad became a defining cultural memory for an entire generation. This, in turn, underscores just how severe the shortage of pesticides once was. After all, airing such a commercial during prime time on the powerful central television network required substantial funding—without robust sales, no enterprise could sustain such an investment.

3.2 After 1994, the international market provided an outlet for China’s excess production capacity.

In 1994, the pesticide industry reached its first turning point: for the first time, China’s pesticide exports exceeded imports, signaling that the country had moved beyond a situation of overall shortages. Instead, structural shortages coexisted with structural surpluses, achieving a dynamic equilibrium. With China’s accession to the World Trade Organization (WTO) in December 2001, a pathway opened for Chinese products to rapidly enter international markets. Leveraging its cost‑competitive advantages, Chinese pesticides enjoyed strong sales worldwide, and the share of domestic production destined for export steadily increased. Between 2011 and 2020, the proportion of China’s pesticide output exported remained broadly stable at around 65%; by 2022, this figure peaked at 84.66%, with export value reaching RMB 151.6 billion. China’s pesticide exports accounted for roughly 50% of global trade volume.

3.3 Excess production capacity is difficult to find new outlets for.

In theory, China’s pesticide exports still have some room for quantitative expansion, but in practice, this may prove difficult to achieve.

3.3.1 The U.S.-China competitive landscape is long-term. As long as this competitive dynamic remains unchanged, the United States will seek to rally certain Western countries to impose restrictions on Chinese products.

3.3.2 For many years, multinational giants have leveraged their R&D capabilities and distribution networks to occupy the high end of the industrial value chain, and they are reluctant to “put all their eggs in one basket” or allow a single supplier country to gain an overwhelming advantage in production capacity.

3.3.3 Despite challenges such as an incomplete industrial chain, certain developing countries, leveraging advantages like low labor costs and lax environmental standards, will, over time, see a modest improvement in their international competitiveness in the pesticide sector. Accordingly, we believe that 2022 represents an exceptional scenario for China’s pesticide exports; under normal circumstances, export levels are likely to remain slightly above or at the same level as those observed from 2011 to 2020.

3.4 The “Hidden Concerns” in Good Fortune

China’s agrochemical industry and its entrepreneurs have been exceptionally fortunate. Riding the wave of the country’s reform and opening-up, they surged onto the scene, swiftly capturing the domestic market; and, capitalizing on globalization, they leveraged advantages such as low labor costs, inexpensive resource utilization, and a fully integrated industrial chain. By means of product imitation, contract manufacturing, and the export of active ingredients and intermediates, they expanded into international markets, enabling China to become a major global producer of agrochemicals within little more than four decades. These two powerful tailwinds are rare indeed. Yet even amid this good fortune, underlying concerns persist: China has not experienced the centuries-long evolution of a capitalist market economy, nor has its agrochemical sector endured severe overcapacity or the resulting vicious cycle of price‑driven competition. As a result, agrochemical entrepreneurs lack the historical experience needed to navigate profound overcapacity.

3.4.1 Blind Capacity Expansion

Why is this round of overcapacity so severe? While the westward relocation of eastern‑region enterprises is one factor, a more critical reason lies in the Chinese agrochemical industry’s long history of smooth sailing. The mindset that “as long as there’s a product, it will sell” has become deeply ingrained, leading companies to simply seek out markets for whatever they produce. Coupled with exceptionally strong market conditions in 2020, 2021, and 2022, many entrepreneurs found themselves flush with cash—and with money in hand, they rushed to expand production. But this time, the industry has run into serious trouble: the market is already saturated, and massive investments have been poured in, unleashing enormous new capacity. As a result, some firms may pay a steep price, learning painful but invaluable lessons.

3.4.2 Treating price cuts as the sole tool for responding to market competition

What should you do when your products aren’t selling well? The first instinct is often to cut prices, and price reductions have become a habitual mindset and a common strategy among some pesticide manufacturers in China. In reality, however, the use of price cuts as a competitive tool is steadily declining in developed countries—particularly in the consumer goods sector—while product innovation is increasingly being leveraged as the primary means of gaining market share.

3.4.3 The Absence of the “Co-opetition” Concept

Lacking the historical lessons from Western developed countries—where overcapacity has led to cutthroat, excessively low‑price competition—some entrepreneurs prioritize “competition” over “collaboration,” embracing a zero‑sum mentality rather than win‑win cooperation. As far as I know, even a niche agrochemical product commands only a few hundred million yuan in the domestic market, yet just three small and medium‑sized firms compete fiercely, driving prices into a freefall. The price‑floor agreement that these industry players had barely reached is abandoned as quickly as one turns a page; any explicit breach of the agreed floor is swiftly replaced by giveaways, which in effect still push prices below the agreed threshold. Such petty “cleverness” on the part of individual firms disrupts the broader industry order. Fortunately, recently several well‑known agrochemical companies have announced reasonable price adjustments and pledged to reject destructive competition, with the hope that this commitment will be fully upheld.

4 Why is the agrochemical industry a market characterized by natural, differentiated competition?

A major strength of the agrochemical industry is its pronounced differentiation. When product homogenization is compounded by severe overcapacity, it can easily give rise to cutthroat competition; differentiation offers the key to breaking this impasse. Most market players aspire to pursue differentiated competition, yet in certain sectors—such as steel, automotive, and cement—the inherent characteristics of these industries result in very limited scope for differentiation, leaving little room to truly set themselves apart. By contrast, the agrochemical sector itself exhibits a high degree of differentiation, making it, in essence, an inherently differentiated industry.

4.1 From the Perspective of Pesticide Users

4.1.1 A wide variety of crop types: This includes not only major and minor field crops, but also a diverse range of non-crop species.

4.1.2 A Wide Variety of Pests, Diseases, and Weeds There is a diverse array of pests, diseases, and weeds that can damage crops.

4.1.3 Strong Regional Characteristics: Due to differences in climate and environmental conditions, crop species and the incidence of pests, diseases, and weeds exhibit distinct regional patterns.

4.1.4 Broad Scope of Applications Pesticides serve not only agricultural production but also landscaping, garden and courtyard beautification, post-harvest storage and preservation of crops, as well as public health and other diverse sectors.

4.2 From the perspective of pesticide performance

4.2.1 A Wide Variety of Pesticides Currently, more than 45,000 pesticide products are registered in China, encompassing over 800 active ingredients; however, this still falls short of meeting societal demand.

4.2.2 In general, the functions of different pesticides are not mutually interchangeable. If their functions were fully interchangeable and some pesticides were significantly more effective than others, the range of pesticide types could be greatly simplified.

4.3 From the Perspective of the Relationship Between Pesticides and the External Environment

4.3.1 There are numerous areas ripe for new development, such as pesticides for aerial application, crop‑protectant products for genetically modified crops, nano‑pesticides, and nucleic‑acid‑based pesticides.

4.3.2 New outbreak hotspots may emerge at any time. As seen in previous years with the fall armyworm, there was a sudden shortage of relevant pesticides. In recent years, changes in environmental and climatic conditions have intensified, making it possible for new outbreak hotspots to arise at any moment.

4.4 From the Perspective of Industry Regulation of Pesticides

As a specialized sector, the pesticide industry is subject to a distinct regulatory framework and administrative licensing regime. The registration‑review system mandates that all pesticides undergo evaluation by a designated national authority prior to market entry; only upon successful review may a pesticide registration certificate be issued. The re‑evaluation system requires periodic reassessment of older pesticides that have been on the market for a certain period; those that no longer meet current standards or pose significant risks to public health and the environment may face bans or restrictions on their use. For instance, in recent years, several highly toxic pesticides have been prohibited. Furthermore, the production and marketing of pesticides are contingent upon obtaining relevant permits, including manufacturing and business licenses.

The agrochemical industry comprises numerous niche segments and features significant barriers to entry. With “local strongholds”—characterized by rugged terrain, secluded courtyards, and high walls—pervading the landscape, it is naturally well-suited to a strategy of differentiated competition. The inherent heterogeneity among firms helps mitigate the pressure of overcapacity and curtails the incentive for destructive price-cutting.

5. What insights does China’s traditional culture of competition offer us?

The Chinese nation boasts a long history and a splendid culture. Having endured the hardships and devastation of war, it deeply appreciates the value of peace. It does not seek conflict out of its own accord, nor does it shy away from it; rather, it strives to avert war through the steady accumulation of strength and by adopting strategies that minimize the likelihood of armed confrontation. This profound cultural and historical ethos has also left a broad imprint on the business spirit and competitive culture, most notably in the principles of conducting business with integrity and valuing harmony above all else.

5.1 Embrace flexible competition and focus on self-improvement

For example: The Tao Te Ching:

“He who knows others is wise; he who knows himself is enlightened. He who conquers others has strength; he who conquers himself is truly strong.”

“The soft and yielding overcome the hard and strong.”

“The strong and overbearing shall not meet a good end.”

“The utmost softness under heaven can traverse the utmost hardness under heaven.”

“Strength resides below, while gentleness and weakness dwell above.”

“The weak overcome the strong, the soft overcomes the hard—everyone knows this, yet no one puts it into practice.”

“Weapons are instruments of ill omen; they are not the tools of the noble gentleman. They are employed only when there is no other choice, and the highest virtue lies in tranquility.”

Laozi, the founder of Daoism, did not advocate subjugating others through violence or force; he regarded war as undesirable and believed that it should be resorted to only as a last resort. Instead, he emphasized self‑cultivation and personal integrity, relying on one’s own strength and strategic deterrence to dissuade potential adversaries. He also advocated addressing problems and disputes with gentleness, ultimately seeking to achieve the goal of “softness overcoming hardness.”

For another example: The Art of War by Sun Tzu:

“Therefore, to win every battle is not the supreme excellence; to subdue the enemy without fighting is the supreme excellence. Hence, the highest form of military art is to break the enemy’s plans; next is to disrupt his alliances; then to attack his forces; and lowest of all is to lay siege to his cities.”

“The victorious army first secures victory and then seeks battle, while the defeated army first engages in battle and then seeks to win.”

“Therefore, the skilled commander subdues the enemy’s forces without fighting, captures the enemy’s cities without assaulting them, and destroys the enemy’s state without prolonged campaigns. He seeks to contend with the world while preserving his strength; thus, his troops remain unharmed, and his gains are complete. Such is the art of strategic attack.”

As the founding master of military strategy, Sun Tzu and his Art of War—the world’s earliest treatise on warfare—first teach not how to fight, but rather advocate minimizing conflict through non‑military means such as “subverting strategy” and “disrupting alliances.” Even when war is unavoidable, one must first make thorough preparations to meet it. The truly skilled commander does not seek to conquer the enemy by brute force on the battlefield, but instead achieves victory through cunning and strategic foresight.

Though the marketplace may resemble a battlefield, it is, after all, not one. Our ancestors taught that harmony is paramount and urged us to do our utmost to avoid conflict; the same principle should guide market competition—striving to steer clear of cutthroat, zero‑sum battles.

5.2 Emphasize planning for long-term benefits and be adept at leveraging economic principles.

For example, Guoyao Tongrentang boasts a history of more than 300 years and places the utmost importance on quality and reputation, treating them as matters of life itself. Its processing standards are encapsulated in the principle: “No matter how elaborate the preparation, we never skimp on labor; no matter how costly the ingredients, we never cut corners on materials,” a commitment that has been steadfastly upheld and truly admirable.

Another example is found in the “Biography of Merchants” in the Records of the Grand Historian:

“When there is drought, provisions are made for boats; when there is flood, provisions are made for carts, in anticipation of shortages.”

“Cheaply acquired, it is valued like pearls and jade; expensively sold, it is treated like refuse.”

“When prices rise to an extreme, they will reverse and fall; when prices fall to an extreme, they will reverse and rise.”

During droughts, stock up on boats; when rains are plentiful, prepare for vehicles. When prices are low, they’re hoarded as if they were treasures; when prices soar, they’re discarded without a second thought. Once prices rise to a certain level, they tend to fall; once they dip too low, they rebound. Economic cycles have always existed—our ancestors recognized and harnessed them long ago, reaping profits in the process. Yet consider this: when did our agrochemical companies invest most heavily? In 2020, 2021, and 2022—when both volume and prices were surging, and firms were raking in profits—many rushed to expand capacity. Looking back now at the time‑tested wisdom of our forebears, doesn’t it seem all the more regrettable?

5.3 Emphasizing self-cultivation through Confucian principles, conducting business with integrity, and valuing harmony.

As stated in the “Biography of Merchants” in the Records of the Grand Historian: “A petty merchant is one who profits himself but harms others; a great merchant is one who profits both himself and others.”

For example, in the culture of the Shanxi merchants: “Prioritize righteousness over profit, cultivate virtue in all interactions, and value harmony above all else.”

Take the culture of the Huishang merchants as an example: they engage in commerce yet uphold Confucianism, integrating Confucian principles into their business practices. They pursue profit while adhering to Confucian moral standards, embedding Confucian thought throughout their commercial operations. Commerce and Confucianism complement and reinforce one another—commerce serves to secure material gain, while Confucianism seeks to cultivate reputation and social standing.

Drawing lessons from history, agrochemical entrepreneurs should study and apply economic principles, uphold integrity, foster cooperation, embrace the greater good, and strive for win‑win outcomes, always keeping in mind the value of harmony. They should refrain from engaging in cutthroat price wars, avoid zero‑sum, life‑and‑death battles, and steer clear of destructive, industry‑crippling conflicts.

6 Where is the room for growth in industries plagued by severe overcapacity?

Severe overcapacity does not mean the industry has no room for growth. In fact, overcapacity primarily reflects an excess in volume; on that single dimension, there is little further room for expansion. However, in a multi‑dimensional, three‑dimensional market, ample opportunities remain across other dimensions. Looking ahead, while total pesticide sales are likely to stabilize, the industry’s output value and profitability could see substantial increases.

6.1 Applying Effort to “He”

In the past, it was often said that competitors are adversaries, a view that made some sense in limited, homogeneous markets. After all, with constrained market demand, if your product sells well, mine may struggle to do so. If your share of the pie grows, mine inevitably shrinks, leaving room for resentment among peers. Yet when viewed on a broader scale, competitors are far from foes—they are allies, partners who can join forces to weather challenges together. The thriving wholesale markets, trade fairs, and exhibitions across regions thrive precisely because they bring together numerous players. Similarly, one of the key reasons China has become a major producer of agrochemicals is its fully integrated industrial chain—a result of seamless collaboration among many enterprises. Thus, the relationship among industry peers is one of “coopetition”: competition is present, but cooperation is even more essential. In a context of severe overcapacity, the sector must place greater emphasis on “cooperation.” First, collaboration: not every facility, piece of equipment, or technology needs to be built in‑house; companies can rely on contract manufacturing and joint R&D, seeking utility rather than ownership and leveraging external resources instead of building everything themselves. Second, mergers: corporate consolidations and restructurings are an inevitable trend, and merging may well be the rational choice. Third, alliances—strategic partnerships that fall between full cooperation and outright merger—offer flexibility, ranging from broad, loose arrangements to deeper, more formal collaborations.

6.2 Enhancing Quality

In the domestic market, there remains a gap between the brand positioning and pricing of Chinese firms and those of multinational agrochemical giants. On the international stage, China primarily exports active ingredients and intermediates, while the share of formulated products—especially those registered overseas—remains relatively low. The product portfolio is dominated by commoditized offerings, with few proprietary intellectual property‑based innovations, resulting in low value added. Increasing investment in R&D, focusing on quality, upgrading product tiers, and enhancing the value‑added content of pesticide formulations all hold substantial potential.

6.3 Patching Gaps in “Shortcomings”

The pesticide market as a whole suffers from overcapacity, yet there are still “gaps” in demand—particularly for products targeting minor crops. Of course, closing these gaps is no easy task, but even the most challenging ones remain gaps. Similarly, pesticides used for aerial spraying and those for home gardening also represent unmet needs in the market.

6.4 Expanding in Width

The concept of pesticides is broad, and their applications are extensive. For instance, there remains considerable potential in using pesticides to replace manual thinning of flowers and fruits, to facilitate mechanical harvesting by promoting withering and leaf fall, to regulate the ripening time of agricultural products for staggered market releases, and to extend shelf life while enhancing the color and appearance of produce.

6.5 Digging Deeper

With the rise of green and organic agriculture, farming has increasingly taken on a multi‑dimensional character. Today, agricultural products are typically categorized into pollution‑free produce, green foods, and organic foods. From a market perspective, this reflects a three‑tiered segmentation of the agricultural product market and, correspondingly, three distinct tiers of requirements for agricultural inputs. Accordingly, the pesticide market is becoming ever more multi‑layered and multidimensional, with specialized formulations tailored to pollution‑free produce, as well as to green and organic foods.

Overcapacity is a normal feature of a market economy; therefore, the issue of overcapacity in the agrochemical sector should not be overinterpreted. By leveraging the broad diversity of the agrochemical market, drawing on the wisdom of traditional Chinese culture, and learning from both the successes and failures of international competition, we can elevate entrepreneurs’ understanding of market dynamics, break the vicious cycle of “massive entry—severe overcapacity—cutthroat price competition,” and foster the healthy development of the agrochemical industry.

Source: Pesticide Science and Management, Issue 1, 2025

Author: Wu Guoqiang (Pesticide Inspection Institute, Ministry of Agriculture and Rural Affairs)