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The effect of China’s The Belt and Road strategy for the pesticide industry
Jan. 5, 2017
Source: Baidu
The Chinese pesticides industry has been a very competitive and fast growing industry for the last years. Its main strengths are comparatively low production costs and advantages in the technology. This has led China to one of the global players in this agrochemical industry, according to CCM.
However, the wealthy growth has finally come to an end in 2015. This was the time, when China experienced a decreasing export of pesticides, mainly caused by an overall declining market worldwide and a resulting lower demand in general, according to CCM. Both volume and value of exports went down in 2015 and the first half of 2016.
Furthermore, the export into developed countries is additionally complicated for China, since they are favoring the interests of international agrochemical players with pesticide residue standards, technical standards, and anti-dumping litigations.
This is, where the project the Silk Road Economic Belt and 21st Century Maritime Silk Road Initiative of the Chinese government is making a difference. More and more Chinese pesticides manufacturers are turning their eyes and efforts onto the countries alongside the silk road, enhanced by enormous development opportunities. To confirm this outlook, also the Plan for Petroleum and Chemical Industry Development (2016-2020) mentions the focus of the Chinese pesticide manufacturers in increasing their production and find new markets in the countries alongside the Belt and Road.
According to CCM, the total export volume of pesticides in 2015 from China has been 1.51 million tonnes. This is the first decline in the last five years. The total export value reached an amount of USD7.28 billion. Also, the import of pesticides has experienced a decline with only 58,000 tonnes import 2015. In 2014 it has been still 67,000 tonnes.
Furthermore, 71.10% of the total export value of pesticides in 2015 belonged to 22 countries alone. The rest 28.90% were exported to around 160 different countries. This shows the high concentration of China’s pesticides export to a few amount of highly concentrated markets. According to China Customs, the top importer in 2015 has been The USA, Brazil, Australia, Argentina, and Vietnam. Except for Australia, all of these importing nations have listed a decline in imports.
While Brazil had a year on year change of -26.57%, Argentina even lost 35.20% compared to 2014.
Top 10 export destinations of pesticides from China (by value), 2015
Source: China Customs
After a deeper look into the 22 most important importers of China’s pesticides, a huge amount of important agricultural countries is being visible. Two of them are the biggest importers of pesticides, like the USA and Brazil. As a fact, the global share of agricultural production is highly concentrated. According to the Food and Agriculture Organization of the United Nations from a report in 2014, the share of the 10 most important agricultural producers of Soybeans, Rice, Cotton, and Wheat is 95%, 83%, 81%, and 70% respectively.
Furthermore, the report states, that the big agricultural nations also include countries with few pesticides imports yet, like Bangladesh, Burma, Cambodia, Uzbekistan, Turkmenistan, Kazakhstan, Ukraine, Tanzania, and Mali. Looking at a map it becomes clear, that many of these nations are located on the Belt and Road.
However, CCM has analysed the fastest growing importing nations of China’s pesticides in 2015 and states, that many of the promising big agricultural producers already are in the list of the fastest growing importers of Chinese pesticides, like Iraq, Kazakhstan, and Uzbekistan with a year on year growth in export value of 146.73%, 48.48%, and 46.50% respectively.
This demonstrates, that the trend of Chinese pesticide manufacturers is already going in the direction of emerging this markets. The trend is very likely to even grow faster in the near future, with the support of China’s The Belt and Road strategy.
The Belt and Road
The Silk Road Economic Belt and the 21st century Maritime Silk Road was originally proposed by the Chinese government under the leadership of Xi Jinping. The main goal is a strengthened connection to China with the rest of Eurasia, including the land-based Silk Road between Europe and Asia and the Maritime Silk Road in Southeast Asia and Africa. The strategy was revealed the first time at the end of 2013.
The strategy is supporting the industry, because it seeks to reduce investment and trade barriers, supports lower trade and investment costs, and promotes regional economic integration. Furthermore, it strengthens co-operation in the industry chain with all related countries.
Source: CCM
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