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 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 where, 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 domestic spread and imported cases”—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 represents a marked improvement over the first quarter’s decline. On this basis, it is reasonable to anticipate positive growth in both the third and fourth quarters. Therefore, 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, reforms continue to advance, the demographic dividend endures, and there remains significant potential for industrialization, urbanization, and the development of metropolitan areas. These factors are fully capable of stabilizing the economy’s underlying fundamentals.

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. However, 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 is 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 on bonds or precipitate a financial crisis. As for the stock market, China’s equity market has distinctive characteristics. Having withstood the test of the pandemic, it has avoided sharp plunges and poses no immediate threat of triggering a financial crisis. Regarding foreign exchange, China boasts robust foreign‑exchange reserves. Despite 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 process 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 demand. 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 economic recovery.

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 becoming particularly pronounced in January and February. Taking exports as an example, compared with the same period last year, the growth rate was –3.91% in January and –41.26% in February; however, these effects were short-lived and did not lead to a fundamental decline in the industry’s overall condition. As the epidemic came under control, relevant national authorities, including the Ministry of Agriculture and Rural Affairs, introduced policies to ensure smooth transport of agricultural inputs and prioritize the resumption of production and business operations. In particular, the Ministry swiftly reinstated export‑related measures in mid‑February, which quickly alleviated the industry’s slump. Export volumes rebounded rapidly in March and April: March saw a year‑on‑year increase of 15.22%, April rose by 37.34%, and May posted a slight year‑on‑year gain, returning the sector to normal levels. 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 remained at or above last year’s levels. The robust performance of the domestic pesticide market may be attributed to favorable agricultural commodity prices this year, restrictions on rural migrant workers leaving their hometowns, and the re‑cultivation of many previously fallow fields. If June and July sales remain broadly unchanged compared with the same period last year, the overall impact of the pandemic on the pesticide industry will be 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 relative to last year, such a trend would be entirely within the norm.

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 a matter of paramount importance to people. To eat, they must engage in agricultural production, which in turn requires agricultural inputs—this is an essential need. Pesticides are a critical component of these inputs, and the effective supply of agricultural products cannot be ensured without their use. Even during economic downturns, people may cut back on clothing and non-essential goods, but they cannot afford to eat less; limited funds 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 instances of poorly ventilated or contaminated environments, thus eliminating the risk of cluster infections. Unlike the secondary and tertiary sectors, agriculture was not subject to mandatory shutdowns during the pandemic. Coupled with the extended Spring Festival holiday, agricultural activities were largely unaffected, ensuring steady demand for pesticides.

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

China is both a major producer and a leading exporter of pesticides. Each year, we produce 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 pesticide products enjoy widespread popularity among consumers around 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, in the short term, China’s position as a key player in the global pesticide market remains firmly established.

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 the first to bring it under control most effectively, 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 or facing prolonged production halts. Agricultural production around the world cannot come to a standstill, 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‑driven 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 caused by 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 correct positioning

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

This is the valuable 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 grip 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 shirks responsibility, 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 national and local authorities 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 the increase of their global market share.

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, 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, marked by 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 make steadfast investments in R&D, so as to swiftly elevate China’s agrochemical industry into the global forefront.

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