Why should the market-oriented reform of chemical fertilizers be accelerated? Multiple factors jointly decide

The market-oriented reform of chemical fertilizers is an irresistible trend. In July 2005, the National Development and Reform Commission issued the "Plan for Reforming and Improving the Chemical Fertilizer Price Regulation Mechanism (Draft)", which explicitly proposed adhering to the orientation of market-oriented reform. However, due to the influence of multiple factors, the current progress of chemical fertilizer marketization is still unsatisfactory. From an analysis of the current internal and external environment of the chemical fertilizer industry, five major factors determine that the pace of market-oriented reform of chemical fertilizers should be accelerated rather than slowed down.

First, the influence of the overall environment. In recent years, one of the greatest features of China's economic work has been streamlining administration and delegating power, seeking efficiency through marketization, and handing over to the market all prices that can be formed by the market, with the government not carrying out improper intervention, so that the invisible hand of the market can fully play its role.

⟦NL> Second, promoting the healthy development of the industry. At present, China's nitrogen fertilizer and phosphate fertilizer production capacity are both seriously excessive, which has become the main reason for the sluggish market. Outdated production capacity must be eliminated to promote the healthy development of the chemical fertilizer industry. Otherwise, not only will enterprises that should die fail to die, but enterprises that should live will also fail to live well. Some chemical fertilizer enterprises have outdated equipment, backward processes, high energy consumption, and heavy pollution, and should have been eliminated long ago, but because of the support of preferential policies, these enterprises are still lingering on.

Third, the policy background has changed. Previously, China's chemical fertilizer industry was small in scale, and its output was far from enough to meet domestic demand, requiring large imports from abroad. To ensure domestic agricultural production demand, the state gave many preferential policies to the chemical fertilizer industry to support its development and increase output. However, with many years of major development, China's annual chemical fertilizer output has reached as much as 70 million tons, which can not only effectively meet domestic demand but also needs to be exported to the international market to absorb excess production capacity. If preferential policies continue to be used to encourage production, then the contradiction of overcapacity in the chemical fertilizer industry will become even more prominent.

Fourth, preferential policies have caused imbalance within the industry. Those enjoying more preferential policies are mainly some older chemical fertilizer enterprises, while new chemical fertilizer enterprises enjoy much fewer preferential policies, which has created imbalance within the chemical fertilizer industry. New enterprises have advanced technology and should have an advantage in competition, but because the preferential policies they enjoy are different, they may not necessarily be able to outcompete those old enterprises that, although lacking technological advantage, have “policy advantage”.

Fifth, the timing for chemical fertilizer marketization is relatively good. In China, difficult reforms are often carried out when prices are falling, which can reduce a lot of resistance. The 2008 fuel tax reform was like this. The fuel tax reform was called the hardest bone to chew. Government departments had long had the idea of fuel tax reform, but because international oil prices were high, it had never been implemented. Later, seizing the opportunity of the sharp drop in international oil prices in the second half of 2008, the state promptly launched the fuel tax reform and established a new oil price formation mechanism dominated by market-based means, which finally came to fruition after many years. Last year's coal resource tax reform was also like this. It had been proposed for many years but had never been implemented. In September last year, seizing the opportunity of the sharp drop in coal prices, it was promptly launched. Now the market-oriented reform of chemical fertilizers also faces such an opportunity. International and domestic fertilizer prices are both very low, and the resistance to market-oriented reform is very small. Even if fertilizer prices rise somewhat after the market-oriented reform, they will still be much lower than the previous high point, and farmers can easily bear it.