Yan Duanshang et al.: Reflections on the Impact of the Pandemic on the Development of China’s Pesticide Industry

Below, from an economic perspective, we will share our views on the impact of the pandemic on the development of China’s agrochemical industry, offering encouragement to this sector as it faces challenging times. We call on all those in the agrochemical field to unite, forge ahead, and overcome these difficulties together, thereby promoting the sustained, healthy growth of the industry and enabling it to make a positive contribution to achieving the “Six Stabilities” and “Six Guarantees” in China’s current economic and social development.

1.1 The economic recession in China caused by the pandemic is short-lived and temporary.

The concept of an economic recession refers to a situation in which, when comparing two consecutive periods, the current period exhibits negative growth relative to the previous one. In the first quarter of this year, compared with the same period last year, the growth rate was –6.8%. Last year’s first-quarter GDP stood at 24 trillion yuan, while this year’s first-quarter figure was 21 trillion yuan; thus, we can say that an economic recession has occurred. Following the second quarter, China brought the epidemic under comprehensive control. While maintaining strict epidemic‑prevention measures—“preventing internal spread and external importation”—the economy resumed work and production in an orderly, phased manner, eventually reaching near‑normal levels. Signs of recovery have become evident: many economic indicators are gradually rebounding, and some are even more robust than in the same period last year. Although the second quarter still recorded negative growth of 3.2% compared with the same period last year, this rate of decline has improved markedly relative to the first quarter. On this basis, it is reasonable to anticipate that the third and fourth quarters will both post positive growth. Accordingly, we can confidently assert that the economic downturn triggered by the pandemic is short‑lived and temporary. Despite its substantial impact, it has not altered the fundamental trajectory of China’s economic development. This is because the Chinese economy itself remains sound: the industrial and supply chains of the vast majority of enterprises remain intact, market demand persists, reform efforts continue, the demographic dividend endures, and there remains considerable potential for industrialization, urbanization, and the development of metropolitan areas. These factors are fully capable of stabilizing the underlying fundamentals of China’s economy.

1.2 The risk of a financial crisis is virtually non-existent.

To revive the economy, stimulate consumption, and promote growth, the government may issue bonds and inject substantial liquidity into the market, which could temporarily raise the debt-to-GDP ratio and intensify inflationary pressures. Nevertheless, the risk of a financial crisis remains entirely manageable. This is because: With respect to the banking system, as of the end of March, China’s non‑performing loan ratio stood at 2.04%, up 0.06 percentage points from the same period last year. Even assuming that the ratio might rise further to 2.1% in the second quarter, the total amount of non‑performing loans would still be only around RMB 3 trillion, while bank deposits exceed RMB 44 trillion. From this perspective, the banking system remains sound and unlikely to trigger a financial crisis. In the bond market, government‑issued bonds are backed by sovereign credit, while corporate bonds rely on commercial credit and are typically secured by solid collateral or guarantees; neither scenario is likely to spark a run that could precipitate a financial crisis. As for the stock market, China’s equity market has distinctive characteristics and, having withstood the test of the pandemic, has avoided sharp declines and thus poses no immediate threat of triggering a financial crisis. Regarding foreign exchange, China boasts robust foreign‑exchange reserves. Even amid the pandemic, monthly trade surpluses have consistently generated hundreds of billions of dollars, and post‑pandemic, foreign investment has remained largely unaffected. Consequently, there is no risk of exchange‑rate volatility spiraling into a financial crisis. In sum, China’s overall financial landscape remains stable.

1.3 The forces opposing globalization are growing, but they will by no means bring it to a halt.

As industrialization and informatization continue to advance, the world is becoming increasingly interconnected, and national integration is steadily deepening—this is an irreversible trend. In the course of advancing globalization, China enjoys unique advantages that no other country can match. First, we have a robust manufacturing base: our industrial sectors are comprehensive, our production scale is vast, product quality is continuously improving, and our price competitiveness is pronounced. Even if some products are not the absolute best in quality, they offer exceptional value for money. As long as we can supply the international market with goods that are well‑received, we need not worry about a lack of buyers. Second, we possess a formidable market advantage: by remaining open, a consumer market of 1.4 billion people will inevitably attract businesses and their products from around the globe. Third, we enjoy a strong edge in services trade: with 1.6 million overseas students generating nearly 400 billion yuan in spending, the largest number of international tourists worldwide, and Chinese visitors accounting for more than 50 percent of total tourist arrivals in certain countries, we also rank among the world’s leading demanders of intellectual property and technological patents—factors that will draw many nations to engage in service‑trade cooperation with China.

The foregoing analysis indicates that the fundamental factors underpinning China’s overall economic improvement remain unchanged, providing a robust supportive environment for the development of the country’s agrochemical industry. At the same time, as an integral part of China’s economy, the agrochemical sector has swiftly resumed production and operations, gradually returning to normal, thereby making a positive contribution to the broader recovery of the national economy.

2.1 The impact from January to May was limited, with overall sales remaining flat.

In the early stages of the pandemic, businesses across all sectors nationwide were shut down for a period, transportation was disrupted, and both domestic and international sales suffered. Pesticide manufacturers likewise faced production halts and logistical bottlenecks, with the industry’s downturn particularly pronounced in January and February. Taking exports as an example, compared with the same period last year, January saw a growth rate of –3.91%, while February recorded –41.26%. However, these effects were short-lived and did not lead to a fundamental decline in the sector’s overall condition. As the epidemic came under control, national authorities—including the Ministry of Agriculture and Rural Affairs—implemented policies to ensure the smooth flow of agricultural inputs and prioritize the resumption of production and operations. In particular, the Ministry swiftly reinstated export‑related measures in mid‑February, quickly easing the industry’s contraction. Export volumes rebounded rapidly in March and April: March posted a year‑on‑year increase of 15.22%, April rose by 37.34%, and May showed a slight uptick compared with the previous year, signaling a return to normalcy. During the same period, the number of export permits issued increased by 25%. Looking at domestic sales from January to May, most producers reported that sales levels were at least on par with or comparable to last year. The robust performance of the domestic pesticide market may be attributed to favorable agricultural commodity prices this year, restrictions on rural labor migration, and the re‑cultivation of many previously fallow fields. If June and July sales remain broadly unchanged from the same period last year, the overall impact of the pandemic on the pesticide industry will have been relatively minor. Last year was the strongest year for pesticide production and sales—especially exports—in recent years; even if this year sees a modest decline compared with last year, such a trend would still be within the bounds of normalcy.

2.2 The rigid demand for agricultural inputs and the unique characteristics of agricultural production methods limit the extent to which the pandemic has impacted the pesticide industry.

Eating is of paramount importance to people; to eat, they must engage in agricultural production, which in turn requires agricultural inputs—this is a basic necessity. Pesticides are a critical component of these inputs, and the effective supply of agricultural products depends heavily on their use. Even during economic downturns, people may cut back on clothing and non-essential goods, but they cannot afford to eat less; limited resources must first be allocated to purchasing production inputs. This is one of the key reasons why the pandemic has had only a relatively minor impact on the pesticide industry. Moreover, agricultural production typically involves small numbers of workers operating across vast expanses of nature, with few enclosed or contaminated environments, thus minimizing the risk of cluster infections. Unlike the secondary and tertiary sectors, agriculture was not subject to mandatory shutdowns during the pandemic, and the overlap with the extended Spring Festival holiday further ensured that agricultural activities remained largely unaffected, thereby safeguarding demand for pesticides.

2.3 The international market’s dependence on Chinese pesticides is such that no single country can replace it in the short term.

China is a major producer and exporter of pesticides. Each year, we manufacture approximately 3 million tons of pesticides, with 50% to 60% destined for export. Pesticides from China are used in 184 countries worldwide, and Chinese exports account for roughly 50% of global trade volume. With its large-scale production, diverse product range, high quality, and competitive pricing, Chinese pesticides enjoy strong consumer appeal across the globe. In recent years, environmental‑protection initiatives have temporarily reduced our production capacity; this has been swiftly and keenly reflected in international markets, prompting many countries to call for increased supply. These developments underscore that China’s position as a leading player in the global pesticide market remains firmly established in the short term.

2.4 The pandemic crisis harbors new opportunities

This pandemic crisis is global in scope, spreading in waves across time and space, and it will continue to circulate worldwide for an extended period. This is a reality we would rather not face, yet one that objectively exists. China was among the first countries to experience the outbreak and also among the first to bring it under effective control, enabling the timely resumption of work and production and ensuring the fastest and most robust economic recovery. While we have long since resumed manufacturing, several major pesticide-producing nations remain vulnerable to the pandemic, still grappling with shutdowns that may persist for quite some time. Agricultural production worldwide cannot come to a halt, and the demand for pesticides remains constant. The international markets these countries once dominated and supplied now require Chinese agrochemical companies to step up—with courage, a sense of responsibility, and adherence to market‑based principles—to help address supply challenges.

Of course, China’s agrochemical industry is currently facing certain challenges in the international environment, such as the global economic downturn and a general decline in purchasing power due to the pandemic; restrictive epidemic‑control measures that disrupt the distribution of agrochemical products; and the fact that the growing season in the Northern Hemisphere has already passed. These challenges require us to respond appropriately.

3.1 Adjust Expectations and Establish the Right Positioning

3.2 Strengthen management and strive for quality and efficiency through effective management.

This is the invaluable experience we have distilled through reform and opening-up in developing and strengthening our enterprises. The more challenging the times, the more we must reinforce management, strive to reduce resource consumption and cut costs, rigorously maintain quality standards, and minimize the occurrence of defective products—thereby enhancing product quality, improving cost‑effectiveness, and boosting overall performance, and steadily navigating through adversity.

3.3 In the face of adversity, we will prioritize quality and uphold our commitments, build a strong reputation and brand, and lay the groundwork for turning things around in the years ahead.

The world is grappling with an economic downturn triggered by the pandemic, and all nations need cooperation and mutual support. Having been among the first to emerge from the pandemic’s impact and to resume production, we also happen to be a major producer of agricultural chemicals, with the international market highly dependent on Chinese agrochemicals. In these challenging times, we must adopt a long-term perspective, place the highest priority on product quality, honor our procurement contracts in full, and, guided by the principle of a community with a shared future, extend as much assistance and support as possible. We must firmly reject any behavior that breaches trust or demonstrates irresponsibility, uphold the image of a major country, strengthen Chinese brands, and solidify enduring cooperative relationships—thereby laying a robust foundation for the sustained development of China’s agrochemical industry.

3.4 Make full and effective use of supportive policies to consolidate both domestic and international markets.

Following the outbreak, both the national and local governments have introduced a series of relief measures. Pesticide companies should make full use of these policies to facilitate a comprehensive resumption of production, swiftly emerge from their difficulties, and ensure that pesticide supplies meet the needs of agricultural production. On June 8, the Ministry of Agriculture and Rural Affairs issued an announcement introducing a registration policy for pesticides intended solely for export, which will greatly facilitate the further expansion of China’s pesticide products into international markets and help increase their share of the global market.

3.5 Firmly uphold the positioning of agrochemicals as a high-tech industry; remain committed to investment, increase investment, build up solid foundations, and achieve breakthroughs through sustained accumulation.

The agrochemical industry is both a chemical‑engineering sector and a biotechnology field, while also encompassing the application of advanced materials technologies; it is, without question, a high‑tech industry. Over more than six decades, China’s agrochemical sector has been nurtured through dedicated effort and sustained investment, achieving impressive scale and superior product quality—and in the near future, it will attain a qualitative leap and breakthroughs in research and development capabilities. In the face of current challenges, we must remain firmly committed to our strategic positioning, uphold an unwavering belief in victory, and continue to maintain steadfast R&D investment, so as to swiftly elevate China’s agrochemical industry into the world’s leading tier.

Authors: Yan Duanxiang, Wu Houbin, Qu Mengmeng, and Cao Bingwei, Pesticide Inspection Institute, Ministry of Agriculture and Rural Affairs

Source: Pesticide Science and Management, Issue 7, 2020