China’s pesticide industry: 40 years of transformation and prospects from global perspective

Pesticides are crucial for agricultural production, vitally affecting crop growth and ensuring the global food supply. 

China has identified over 2,300 types of pests, diseases, weeds, and rodents, and without pesticide protection, crops would face significant damage, leading to a drastic reduction in grain production and posing a threat to food security. As one of the earliest countries to use pesticides, China’s history of pesticide application dates back to the 5th to 7th centuries B.C. However, the modernization of the industry began relatively late. Prior to the establishment of New China, the sector was marked by weak infrastructure, outdated technology, and a limited range of products that did not meet agricultural needs. 

Following the founding of New China, the government actively promoted the development of the pesticide industry. Through continuous efforts, China has become the world’s largest producer and exporter of pesticides, making significant contributions to global food security. The industry has evolved from providing highly toxic pesticides to offering new, efficient alternatives characterized by low toxicity and low residues. This transformation reflects remarkable advancements in research and development, production processes, quality control, and more, all while consistently adapting to the demands of agricultural modernization.

Review of Development History

1.A Difficult Start (1949 - 1978)

In the early years of New China, the country implemented a planned economy, which made it challenging for the pesticide industry to get off the ground. As a strategic material, pesticides were mainly produced and sold by state-owned enterprises. During this time, agricultural disasters were common, and pest and disease issues were particularly severe. The range of available pesticides was limited, predominantly consisting of highly toxic substances like organic mercury, organic quinones, and organochlorines. 

Highly toxic pesticides such as HCH and DDT were prevalent in the market, and outdated production technologies combined with low output meant that the industry was far from meeting agricultural needs. Annually, crop losses due to pests and diseases exceeded 30%. Farmers, lacking scientific knowledge, often relied excessively on pesticides, viewing compounds like 1605 (parathion) and 1059 (demeton) as ″miracle solutions,″ which frequently resulted in poisoning incidents among both humans and livestock. During this period, pesticide companies primarily focused on overcoming technical challenges, increasing production capacity, and addressing the pesticide shortage.

2.Growth in Era of Reform and Opening Up (1978 - 1997)

The reform and opening-up policy initiated in 1978 revitalized the pesticide industry in China. The market was opened to private and foreign enterprises, which marked a significant shift. At that time, China’s pesticide industry was still underdeveloped, with an annual output of around 500,000 tons and a limited range of products. Highly toxic and high-residue pesticides accounted for 70% of the market, and the industry was heavily reliant on imports. The implementation of the household responsibility system in 1983 sparked farmers’ enthusiasm for agricultural production, leading to a surge in pesticide demand and the emergence of numerous new enterprises. 

In the early 1980s, organochlorine pesticides dominated the market with a 70% share. However, by the 1990s, organophosphate insecticides such as methamidophos and parathion took over, capturing 70% of the market. New products like carbamates and pyrethroids were also introduced during this period. International chemical giants like DuPont, Dow, and Bayer entered the Chinese market, establishing offices and introducing high-quality products. Domestic companies began exporting pesticides, and in 1994, exports surpassed imports for the first time. Despite this growth, the industry faced challenges. 

The publication of ″Silent Spring″ raised awareness about the negative impacts of pesticides, leading to the rejection and destruction of agricultural products due to excessive pesticide residues. In 1983, China halted the production of HCH and DDT, marking the end of the organochlorine era. Additionally, the proliferation of counterfeit and substandard products, highlighted by the Jintan counterfeit pesticide incident, shocked the nation and prompted the government to accelerate the establishment of pesticide regulations. Since 1978, a series of rules have been enacted, culminating in the first ″Pesticide Management Regulations″ issued by the State Council in 1997, which marked the industry’s transition to a legal framework.

3.Adjustment and Upgrading (1997 - 2017)

The introduction of the first ″Pesticide Management Regulations″ in 1997 significantly strengthened safety management and legal governance within the pesticide industry, marking a crucial period of adjustment and upgrade. At that time, pesticide shortages were alleviated, and the safety of agricultural products gained increased importance. Underpinned by policy, the development of efficient, low-toxicity and low-residue pesticide varieties accelerated. In April 2001, the Ministry of Agriculture launched the ″Action Plan for Pollution-Free Food,″ which expedited the phase-out of highly toxic pesticides. This initiative prohibited the sale and use of methamidophos and fenamiphos while restricting 23 other types of pesticides. As a result, new pesticide varieties emerged, leading to a significant shift in product structure and a decline in the dominance of insecticides. 

By 2010, insecticides accounted for only 31.4% of the market share, while herbicides rose to 41%, surpassing insecticides, and fungicides held a 7% share. There was also rapid growth in neonicotinoids, insect growth regulators, and bio-pesticides. China’s accession to the WTO in 2001 opened the international market to the pesticide industry, further accelerating its development. By 2005, China had become the world’s largest producer and exporter of pesticides. The influx of high-quality international products put pressure on domestic firms to innovate, prompting improvements and the replication of off-patented products while expanding exports. 

In 2017, the 19th National Congress of the Communist Party of China elevated ecological civilization construction to a strategic level, transforming environmental protection requirements from ″soft constraints″ to ″hard indicators.″ Companies that failed to meet pollution standards faced production suspensions or shutdowns, propelling the industry toward a greener and more environmentally friendly transformation.

4. Innovation-driven Development (2017 - present)

Since 2017, environmental protection and safety have become crucial for the green and high-quality development of the pesticide industry, and the industry ushered in a new phase driven by innovation. The legal management of pesticides has been strengthened, and the concept of complete lifecycle management has gained widespread acceptance. The ″13th Five-Year Plan″ for the pesticide industry has outlined the developmental direction. Through supply-side reforms and lessons learned from multinational corporations, the industry aimed to create a comprehensive industry chain that enables pesticide enterprises to compete on an international scale. Consolidation within the industry and resource integration have emerged as prevailing trends. 

In recent years, the Chinese pesticide industry has experienced both prosperity and challenges, witnessing significant growth from 2021 to 2022, followed by a downturn in 2023 marked by overcapacity and fierce internal competition, influenced by industry cycles and broader socioeconomic factors. In response to this challenging environment, companies are seeking breakthroughs by increasing their R&D investments, shifting from traditional chemical synthesis to innovative technologies, such as biological fermentation, to reduce costs and enhance efficiency, and developing green and efficient pesticide products. Additionally, they actively establish comprehensive industry chains by integrating upstream and downstream resources through acquisitions and collaborations to expand production bases, extend the industrial chain, achieve integrated layouts, improve overall competitiveness, and mitigate market risks.

Market Trend Insights - Challenges and Opportunities

1.Challenges of Supply-demand Imbalance

In recent years, global demand for pesticides has shown a steady growth trend, increasing by approximately 3% to 5% annually, which supports industry development. However, the supply side is facing significant oversupply issues with traditional pesticide varieties. The widespread adoption of technology has led many enterprises to enter the market, resulting in capacity expansions that far exceed the growth in demand and intensifying competition. Over the past two years, geopolitical factors have reshaped the international pesticide market. Countries like India are aggressively expanding their production capacity and capturing market share through competitive pricing, further heightening domestic market competition. 

Amid this fierce competition, prices for pesticide products have continued to decline, with some companies embroiled in damaging price wars. For instance, the cost of chlorantraniliprole has plummeted from RMB 2,400,000 per ton to RMB 220,000 per ton, while glufosinate has dropped from over RMB 200,000 per ton at its peak in 2022 to below RMB 50,000 per ton currently. Additionally, India has implemented anti-dumping measures against certain pesticide products from China, creating significant challenges for supply and demand in the pesticide industry.

2.Opportunities in Niche Markets

Crops are confronted with a wide range of pests and diseases, with over 2,300 types identified in China alone. Additionally, the diverse planting structures and growing environments across different regions lead to significant variations in pesticide demand, contributing to the highly segmented nature of the pesticide industry and giving rise to numerous niche markets. While these markets may be relatively small, they present substantial opportunities for businesses. 

Companies that focus on specific niches, gain deep insights into the patterns of pest and disease occurrence in those areas, meet crop growth needs, and accurately develop targeted pesticide products while continuously optimizing their production processes are more likely to achieve a balance between supply and demand and create growth opportunities. For example, making specialized pesticides designed for the unique pests and diseases affecting economically important crops can effectively address farmers’ challenges, resulting in substantial market recognition and economic benefits.

3.High Entry Barriers and User Loyalty

Due to its capital-intensive nature, the pesticide industry is marked by significant entry barriers. Establishing a modern pesticide production facility requires a substantial investment, which can range from land acquisition and factory construction to the purchase of production and environmental protection equipment, often amounting to hundreds of millions or even billions of yuan. As environmental regulations become more stringent, companies must continuously invest in upgrading automation and continuous production and reaction equipment to meet compliance standards. 

Additionally, developing pesticide products necessitates a considerable accumulation of technical knowledge across various disciplines, including chemistry, biology, and agronomy, resulting in high technical barriers. The industry is also subject to strict administrative regulations, with every aspect—from product development and registration to production and sales—requiring adherence to rigorous standards and complex procedural requirements, further increasing the entry barriers. The high costs associated with trial and error compel companies to make cautious decisions.

When it comes to user loyalty, pesticides are functional products that often show significant similarities among offerings from various manufacturers. End users tend to prioritize cost-effectiveness in their product selection. Although established brands can charge premium prices, price remains a critical factor. However, because of the specialized nature of pesticide application, farmers have a strong demand for after-sales services, such as usage guidance and pest control consultation. This creates a competitive advantage for companies that can provide high-quality after-sales service, helping them build user loyalty in the market.

Future Development Outlook

1.Deepening niche markets and collaborative win-win strategies

In today’s fiercely competitive and complex industry landscape, pesticide companies must accurately identify their niche markets and sharpen their focus. By leveraging their strengths, they should precisely target specific segments, conducting thorough investigations into pest and disease patterns, crop characteristics, and farmer needs to develop highly targeted and distinctly differentiated pesticide products. For example, early investment in the development of efficient, low-toxicity, low-residue, and environmentally friendly specialized pesticides for specific economic crops can help secure a leading position while establishing technological barriers and brand advantages. 

At the same time, collaboration among enterprises is essential for achieving win-win outcomes. Companies should enhance communication and forge strategic partnerships that facilitate resource sharing and complement each other’s strengths. Upstream and downstream enterprises can work closely together in areas such as raw material supply, production processing, and product sales. Meanwhile, firms within the same industry can engage in joint technology research and market expansion to mitigate risks, overcome challenges, and explore markets for mutual benefit.

2. Innovation as the Driving Force

Innovation is the key driving force behind the pesticide industry's ongoing advancement. Companies should boost their investment in research and development, integrating innovative concepts into product development, production process optimization, and the expansion of application technologies. 

On the one hand, it’s essential to continually enhance existing pesticide production processes by incorporating automation, intelligent systems, and continuous production technologies. This approach can improve efficiency, reduce costs, and minimize energy consumption and pollutant emissions. Furthermore, exploring cutting-edge biotechnologies like biological fermentation and gene editing in pesticide synthesis can lead to the development of green, effective, and safe pesticide products. 

On the other hand, creating new pesticides is vital for China’s pesticide industry to penetrate the high-end international market. Enterprises should strengthen collaborations with research institutions and specialized R&D organizations, focusing on the development of novel insecticides, fungicides, herbicides, and plant growth regulators. They should aim to create innovative pesticide varieties with independent intellectual property rights, unique mechanisms of action, and environmentally friendly attributes, thereby enhancing China’s influence and competitiveness in the global pesticide market.

3.User-centric Transformation

Pesticide companies need to shift their business philosophy from a production-focused approach to a user-centric model. The needs and satisfaction of end users determine the market potential of their products. Companies should adopt a service-oriented mindset throughout the entire industry chain. During the development phase, thorough field research is essential to understanding farmers’ needs and creating practical, user-friendly, and effective pesticide products. Additionally, reinforcing collaboration with distributors and retailers during the sales phase is crucial for establishing a broad, responsive, and attentive sales network. 

Moreover, enhancing after-sales service by providing professional usage guidance, pest and disease management training, and field management advice adds significant value for farmers. This support helps them use pesticides scientifically and achieve precise pest control, ultimately improving crop yield and quality. By centering operations around end users, companies can build trust and enhance their reputation, securing a competitive advantage in the market while promoting sustainable, healthy, and stable industry development.

Conclusion

Looking back on the 40-year journey of development in China’s pesticide industry, it has reached remarkable milestones, transforming from a struggling sector to the world’s largest producer and exporter. Today, in the face of challenges such as international competition, environmental regulations, and technological advancements, companies must prioritize innovation, explore niche markets, adopt a user-centric approach, and strengthen international collaboration to solidify their position in the global market. With its solid foundation and innovative spirit, it is believed that China’s pesticide industry will continue to play a vital role in global food security and sustainable agricultural development, reaching new heights.