Can China’s New Molecule Strategy Break the Low-Margin Cycle?
9 October 2025 Editor’s note: This article is adapted from the September 2025 China Price Index, a regular column by David Li, Marketing Director at SPM Biosciences, exclusively for AgriBusiness Global.
As the global crop protection market enters a challenging new phase of slower growth, oversupply, and shrinking margins, Chinese pesticide companies are seeking a way forward. Increasingly, that path appears to be built not on commodity actives, but on new molecules and near off-patent compounds that can offer a competitive edge in saturated global markets.
“Relying solely on B2B sales to multinationals is no longer a viable growth strategy,” says David Li, Marketing Director at SPM Biosciences, and a contributing writer to the China Price Index. “Chinese suppliers must rethink their market role and invest more strategically in product assets.”
Rethinking the MNC Relationship
Historically, China’s pesticide industry has thrived as the manufacturing engine behind multinational corporations (MNCs), producing active ingredients and intermediates for branded products sold across global markets. But that dynamic is under strain.
“Chinese companies that remain anchored to MNC demand are facing diminishing returns,” says Li. “Even companies executing well-managed B2B models are failing to deliver superior returns on assets during the current industry downturn.”
The problem, he argues, is structural. MNCs are under intense pressure to reduce procurement costs. In that environment, Chinese suppliers are being asked to lower margins without receiving long-term volume commitments in return — an unsustainable tradeoff.
“Unless MNCs agree to long-term procurement guarantees,” Li explains, “Chinese suppliers will increasingly look to diversify their strategies and pursue higher-margin opportunities elsewhere.”
The Race for Post-Patent Compounds
One such opportunity is investing in new molecules or compounds nearing patent expiration. As patents lapse on blockbuster actives, Chinese producers are quick to ramp up production capacity, hoping to grab global market share.
But this too presents risk.
Take the case of SDHI fungicides like saflufenacil and pyroxasulfone — two actives nearing patent expiry and closely watched by the industry. According to data from Kynetec, global demand for these compounds remains relatively limited. Yet “paper capacity” from Chinese producers — planned or proposed production — has already far outstripped actual field demand.
“It’s a classic overcapacity trap,” says Li. “Everyone sees the same opportunity, but not everyone understands the long game required to turn capacity into sustained revenue.”
That “long game” includes more than just technical manufacturing. To compete globally, Chinese companies must also navigate toxicological studies, metabolite data, regulatory reviews, and registration processes in key markets.
Building Product Assets, Not Just Products
Li argues that the shift toward new molecules is not just about selling actives — it’s about building product assets that deliver value across their entire lifecycle.
“In mature markets like crop protection, product lifecycle management is everything,” he says. “New molecules must be strategically positioned — not just manufactured cheaply.”
The ability to delay a product’s transition into its long-tail phase, or to deploy defensive pricing and formulation strategies, is what differentiates high-value product assets from mere commodities.
Yet this is where Chinese suppliers often fall short.
“Too many companies stop at production,” Li says. “They don’t invest in differentiated formulations, global registration data, or local agronomic support. That’s where real market value is created.”
Looking Ahead
While China’s anti-involution policy reforms are helping to curb reckless price competition and encourage industry consolidation, they cannot solve the strategic void facing many agrochemical firms. The race to dominate the post-patent landscape will be decided not just by who can manufacture at scale, but by who can create and defend product value.
“Winning in the next cycle will require a mindset shift,” Li concludes. “Not just from a manufacturer to a marketer, but from a price taker to a value creator.”
With global demand expected to rebound gradually by 2026, companies that can successfully navigate the transition from generic supplier to strategic innovator may finally escape the low-margin treadmill that has long defined China’s pesticide sector.
- Read the full article: China Price Index: A Different Path for Chinese Companies Amid Brazil’s Crop Protection Crisis
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