Beijing, January 8, 2026 — In a significant policy shift, China’s Ministry of Finance and the State Taxation Administration announced the cancellation of Value-Added Tax (VAT) export rebates for a range of products, including over 20 pesticide technical materials and intermediates, effective April 1, 2026.
The affected agrochemicals include major products such as glufosinate, L-glufosinate, acephate, flubendiamide, fosetyl-aluminium, malathion, benzobicyclon, sethoxydim, and ethephon. Industry analysts note the list strategically targets both severely oversupplied commodities like glufosinate and high-toxicity or restricted-use substances.
Notably, the policy adjustment spares formulated pesticide products, maintaining their existing export rebate benefits. This selective move is widely interpreted not as a routine fiscal tweak, but as a targeted measure to overhaul the sector. It aims to curb the long-standing practice of exporting domestic overcapacity and low-value competition—often described as “internal competition externalized”—and force a transition towards higher-value development.
“The policy is a calculated strike against the industry’s ‘volume-over-value’ model,” said an industry expert familiar with the matter. “By removing the rebate cushion for bulk commodity actives and toxic chemicals, it directly attacks the root of cut-throat, low-margin competition. The preserved rebates for formulations clearly signal where the government wants the industry to go up the value chain.”
Short-Term Turbulence and a Rush to Ship
The immediate impact is expected to be a sharp rise in export costs for the listed products, squeezing margins, particularly for smaller exporters with weak pricing power. A “rush to export” is anticipated before the April 1 deadline, as international buyers seek to lock in orders under the current terms.
“A surge in Q1 export volumes for these chemicals is almost certain,” said a manager at a Henan-based pesticide company. “But this will borrow from future demand. Once the window closes, we may see a contraction, accelerating a shakeout among weaker players who relied on the rebate to compete.”
Winners and Losers: Reshaping the Competitive Landscape
The policy is predicted to intensify the “Matthew Effect,” strongly favoring large, integrated players with global operations.
The primary beneficiaries are likely to be two types of leading enterprises:
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Vertically Integrated Giants: Companies that control both technical material production and formulation manufacturing gain a distinct advantage. They can pivot exports towards higher-margin, branded formulations which still enjoy rebates, effectively sidestepping the policy’s negative impact.
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Global Operators: Firms with extensive international registrations, established brands, and mature global supply chains will benefit as the policy squeezes out smaller, less efficient exporters dependent on rebate-subsidized prices. This will consolidate market share in the hands of top-tier companies.
“Players like扬农化工,润丰股份, and利尔化学, which have invested in formulation capacity and global market access, are structurally well-positioned,” the industry expert added. “The policy removes a subsidy that had perpetuated low-end competition. For integrated leaders, this is a net positive long-term.”
Long-Term Vision: Catalyzing a High-Value Transition
The long-term objective of the rebate cancellation is to fundamentally reset the industry’s trajectory. By ending fiscal support for oversupplied and undesirable products, the government aims to re-channel resources towards innovation, branding, and services.
“The message is unambiguous: future support will favor high-value formulations, proprietary overseas registrations, brand building, and quality—not just bulk chemical exports,” the expert stated. “This list might just be the start. We could see it expanded to include other oversupplied or problematic categories.”
The year 2026 thus marks a potential inflection point for China’s pesticide industry. While short-term disruptions are inevitable, the policy is designed to compel a strategic shift from scale expansion to quality- and value-driven growth, aiming to secure a more sustainable and profitable position in the global agrochemical value chain.
