Journal of Environmental Quality
TECHNICAL REPORTS
Nutrient Management Challenges and Progress in China
An Analysis of Chinas Fertilizer Policies: Impacts on the Industry,
Food Security, and the Environment
Yuxuan Li, Weifeng Zhang,* Lin Ma, Gaoqiang Huang, Oene Oenema, Fusuo Zhang, and Zhengxia Dou
China has made remarkable strides in recent decades to grow
enough food to feed 20% of the worlds population with only 9%
of the worlds arable land. Meanwhile, the nation is experiencing
exacerbated air and water pollution problems. Agricultural growth
and the pollution aggravation are closely linked with policies
affecting fertilizer production and use. Essentially nonexistent
in 1950, Chinas fertilizer industry is now a robust conglomerate
producing fertilizers in amounts that not only meet domestic
demand but also contribute to international trade. The industrys
growth stemmed from a series of policy progressions, featuring (i)
a total control system with state ownership and central planning
(19491984), (ii) a dual system of central planning and market
adjustment (19851997), (iii) a market-driven system with
government-mandated price caps (19982009), and (iv) a complete
market-oriented system (since 2009). In conjunction with the
policy changes were massive subsidy programs totaling more than
$18 billion in 2010. The support policies and subsidies helped
grow the industry and safeguard an adequate supply of fertilizers at
affordable costs to farmers, but the artificially low-priced fertilizers
also contributed to a nationwide trend of fertilizer overuse, leading
to nutrient pollution. China needs innovative policies and programs
to address food security and sustainability challenges. In this study,
we review and analyze policies and programs related to Chinas
fertilizer production and use in a 60-yr span (19502010) and
discuss its impact on the development of the industry, food security,
and pressing environmental issues. Finally, our study analyzes long-
term trends in fertilizer use in China and offers some key viewpoints
to stimulate debates among all stakeholders.
Copyright American Society of Agronomy, Crop Science Society of America,
and Soil Science Society of America. 5585 Guilford Rd., Madison, WI 53711 USA.
All rights reserved. No part of this periodical may be reproduced or transmitted
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writing from the publisher.
J. Environ. Qual. 42:972981 (2013)
doi:10.2134/jeq2012.0465
Received 4 Dec. 2012.
*Corresponding author (wfzhang@cau.edu.cn).
972
Special Section
F ertilizer is an indispensable input in modern agricul-
ture. The widespread use of fertilizers has greatly contrib-
uted to the huge increases in food and feed production
worldwide during the last six decades, together with improve-
ments in crop and animal traits, irrigation and drainage, and
pest and disease management (Matson et al., 1998; Smil, 2001;
Tilman et al., 2002; Mosier et al., 2004). However, the extensive
use of fertilizers has also contributed to soil acidification, eutro-
phication of surface waters, pollution of aquifers, and increased
emissions of ammonia (NH3) and greenhouse gases (notably
N2O, CO2, and CH4) to the atmosphere in China and globally
( Ju et al., 2009; Guo et al., 2010; Good and Beatty, 2011; Liu et
al., 2013). It has been predicted that fertilizer use and nutrient
losses to the environment will continue to increase in the coming
decades (Tilman et al., 2001) unless drastic improvements are
made in nutrient management that will allow us to simultane-
ously feed the growing human population and decrease the envi-
ronmental impacts of food production.
Worldwide, there is a gross imbalance in fertilizer use (Vitousek
et al., 2009). Although industrialized and affluent societies have
focused on targeted use of fertilizers, many developing countries
are struggling to meet a growing demand for food with dismally
inadequate fertilizer inputs. For example, the amounts of nitrogen
(N) and phosphorus (P) fertilizer used in western Kenya were
7 and 8 kg ha-1 respectively, compared with 93 and 14 kg ha-1
in the United States (Vitousek et al., 2009). It is not that soils
in Kenya do not need fertilizer input; rather, low availability
(i.e., the lack of an adequate transportation and distribution
network) and high prices of fertilizers to local famers, the large
spatial variability of fertilizer nutrient requirements, and many
differences in farmers resource endowments and market access
are major challenges to the profitable and sustainable use of
fertilizers in the region (Mwangi, 1997).
China is an interesting case here. As the human population in
China doubled in the past five decades, the total grain production
more than tripled, and fertilizer use increased 10-fold. China
is feeding more than 20% of the world population with less
Y. Li, W. Zhang, L. Ma, G. Huang, and F. Zhang, Center for Resources, Environment
and Food Security, China Agricultural Univ., No. 2 Yuanmingyuan Xilu, Haidian,
Beijing 100193, P. R. China; L. Ma, Dep. of Soil Quality, Wageningen Univ., P.O. Box
47, 6700 AA, Wageningen, The Netherlands; O. Oenema, Alterra, Wageningen
Univ. and Research Centre, P.O. Box 47, 6700 AA, Wageningen, The Netherlands; Z.
Dou, Center for Animal Health and Productivity, Univ. of Pennsylvania, School of
Veterinary Medicine, 382 West Street Rd., Kennett Square, PA 19348. Assigned to
Associate Editor J.T. Sims.
Abbreviations: DAP, diammonium phosphate; VAT, value-added tax; WTO, World
Trade Organization.
than 9% of the global arable land. The average rate of fertilizer
applications increased from 5.4 kg ha-1 (NPK nutrients) in
1960 to 506 kg ha-1 in 2010 (National Bureau of Statistics of
China, 2011a). However, the environmental costs are very large,
particularly from the overuse and mismanagement of chemical
fertilizer and manure. Nutrient losses from agriculture have been
blamed for serious water quality problems in lakes and rivers
across the country. According to the official report (Ministry of
Environmental Protection of China, 2010), annual loading of
N and P from the agriculture sector to the nations water bodies
were 2.7 and 0.3 Tg, which contributes roughly 60% of the total
N and P loads. Soil pH of Chinas cultivated land decreased by
0.5 units since the 1980s, with most of this decline (6090%)
attributed to N fertilizers, particularly the widespread use of
ammoniacal fertilizers such as ammonium bicarbonate and
urea (Guo et al., 2010). Nitrogen deposition increased by 60%
since the 1980s due to growth in fertilizer use and emissions
from fossil fuels consumed by vehicles and industries (Liu et
al., 2013). China has arrived at a crucial point where the push
for producing more food, oftentimes with greater inputs, must
be balanced with the dire need to sustain natural resources and
environmental quality for future generations. To address the
countrys widespread water quality and other nutrient-related
environmental issues (e.g., soil acidification, N deposition, and
climate change), fertilizer management ranging from guiding
policies to field practices must be examined and critical control
points for improvement identified at the national level.
China and Africa share certain similarities in agriculture.
Both have millions of small holders, mostly illiterate or with
minimal education, each farming a small parcel of land. Similar
to the situation in many African nations today, Chinese farmers
had little access to fertilizers throughout 1950s and 1960s and
even into the 1970s. Given this, how was China able to develop
a robust fertilizer industry and see its farmers increase fertilizer
use to such a level that is often far above agronomically sound
and environmentally responsible ranges? To understand this,
it is necessary to examine the development of Chinas fertilizer
industry as well as its agricultural, field-scale trends of fertilizer
use in light of government interventions through various policies
and support programs. The objectives of the present study were
(i) to analyze Chinas fertilizer-related policies and examine their
impact on the industry in terms of production, distribution, and
use in the last six decades and (ii) to discuss prevailing issues and
emerging challenges and to provide suggestions for potential
resolutions. It is our desire that such an analysis will help initiate
a healthy debate for improving Chinas existing system toward an
integrated and wholesome management of agricultural nutrients
for sustainable productivity. We also hope that Chinas story
may provide valuable lessons for developing countries to devise
relevant policies and programs that are more effective in serving
production and sustainability purposes.
Development and Progression in Fertilizer-
Related Policies
The development of Chinas fertilizer industry is entwined with
and affected by governmental policies, which gradually evolved
over the last six decades and can be categorized chronologically
into four phases (Table 1): a historically strict state ownership
and price control system (19491984; phase I), which gradually
transitioned into a dual system of central planning and market
adjustment (19851997; phase II), followed by the government
releasing its direct grip and letting the market influence fertilizer
production and prices while still maintaining an indirect
intervention through price caps (19982009; phase III), and
finally moving to a full market system with price caps removed
(except for imported fertilizers) (2009; phase IV). Parallel to the
policy advancement were various subsidy programs that were put
into place to bolster the growth of the fertilizer industry and to
ensure fertilizer affordability for Chinas hundreds of millions
of farmers and for the nations food security at large. Below, we
dissect the complex fertilizer price control policies and subsidy
programs and discuss their relevant impacts.
Price Control
For over 30 yr (19491984; phase I), Chinas fertilizer
industry was a strict, centrally controlled production and
management system. During this period, fertilizer production
increased gradually from 0.006 to 14.6 Tg (NPK nutrients),
and consumption rose from 0.07 to 17.4 Tg, with the gap being
filled with imported fertilizers (National Bureau of Statistics
of China, 2009). The distribution and allocation of fertilizer
products (and other agricultural materials) were managed and
controlled exclusively by a state-owned entity, the National
Supply and Marketing Cooperative (Fang and Hu, 2007). The
pricing structure during this time consisted of the purchase
price of domestically manufactured and imported fertilizers,
the allocation price regarding transport, a relevant quota to
individual provinces, and the retail price at the end of supply

Table 1. Development, transition, and characteristics of fertilizer related policies in China.

Phase Main characteristics Production Consumption
Tg
Phase I (19491984) Central planning; state ownership; total government control from fertilizer 14.6 17.4
manufacturing to distribution and retail pricing
Phase II (19851997) A dual system of central planning and market-adjustment, with gradual 28.2 39.8
transition to the latter; dual-track pricing system
Phase III (19982009) Primarily market-driven but with price cap set by the government and subsidy 63.9 54.1
programs (e.g. preferential pricing for electricity and natural gas used in fertilizer
manufacturing, railway transport of fertilizers, exemption of value added tax of
fertilizer products)
Phase IV (2009) Price cap removed; subsidy programs intact

Annual domestic production and consumption for the year at the end of the given period were estimated based on data from the National Statistics
Bureau of China (National Bureau of Statistics of China, 2011a).

www.agronomy.org www.crops.org www.soils.org 973

chain, all of which are controlled and set by the government
(Wang et al., 2008).
Beginning in mid-1980s, the country started to shift from a
central-planning economy to a market economy. At this time,
the rural markets for agricultural products were liberalized. For
example, in a 2-yr span between 1990 and 1992, the number
of markets increased by nearly 10%, and the value of goods
traded rose by more than 25% (Weersink and Rozelle, 1997). To
accelerate fertilizer production and meet the food demand due to
population growth and dietary changes, the government initiated
a dual-track pricing system. On the one hand, production quotas
were allocated to manufacturers in conjunction with fixed
prices for the products. On the other hand, manufacturers were
allowed to sell surplus fertilizers beyond the quota at market-
determined prices. The latter prices were much higher than
the former because of the fast-growing demand for fertilizers.
Under the dual-price system, manufacturers strived to expand
their production capacity beyond their quota for maximum
profit. As a result, fertilizer production increased from 13.2 Tg
in 1985 to 28.2Tg in 1997, with an annual increase of 1.06 Tg
(NPK nutrients) (National Bureau of Statistics of China, 2009).
By this time, the amount of N fertilizer produced domestically
was in balance with its consumption, whereas P and K still relied
mainly on imports from the United States (P fertilizer), Russia,
and Canada (K fertilizers).
However, with a fast-growing demand for fertilizers, the
price gap between the quota-based and market-based fertilizer
products became wider and wider, eventually giving rise to the
phenomenon of fertilizer resales by individuals or private agents
with prices spiraling out of control, which interfered with
fertilizer distribution system. Therefore, in the late 1990s the
government moved to abolish the dual-track fertilizer pricing
system and started to promote a market-oriented reform of
fertilizer production. Fertilizer manufacturers and retailers were
now allowed to determine fertilizer prices but with a cap set by
the government that mandated a maximum profit of 7%.
From the total control policy (1950s until mid-1980s) to
the dual-pricing system (mid-1980s until 1997) and to the price
cap thereafter, the deepening reform with a growing market-
driven system greatly invigorated Chinas fertilizer industry. By
the late 2010s, China was producing enough N and P fertilizers
not only to fulfill domestic consumption but also to export to
other countries, such as India, Vietnam, Pakistan, and Thailand
(although imported K still accounts for 70% of Chinas domestic
consumption). Then, in 2009, the State Council abolished the
price cap policy. This latest policy change removed all price
control or restrictions (except for tariff mandates regarding
fertilizer import and export), signaling the beginning of an era
dominated by a complete open market system. Regardless, the
massive subsidy programs put in place by the central government
remain in effect today (see subsequent section on subsidy
programs).
Regarding fertilizer tariffs, after entering the World Trade
Organization (WTO) in 2001, China instituted the Tariff Rate
Quotas policy with a 4% tariff rate for certain imported fertilizers
(e.g., urea, diammonium phosphate [DAP], and compound
fertilizers) and 50% for all other fertilizer products. Starting in
2006, the tariff rate was adjusted to 1% for 16 fertilizer products
(including urea, triple superphosphate, and potassium nitrate).
974 Journal of Environmental Quality
Meanwhile, export tariffs increased. In 2012, all export fertilizers
were subject to tariffs, with the rate varying according to different
seasons. For instance, a 110% tariff rate was imposed for urea
exported between January and June as well as in November and
December, but only 7% was imposed between July and October
(General Administration of Customs of China, 2011).
Subsidy Programs
During more than 30 yr of state ownership, government
investment in the fertilizer industry accounted for 40% of the
total monetary investment in the entire chemical industry in
China. After 1998, private capital started to enter the fertilizer
industry, intrigued by the opening of rural markets and the dual-
track fertilizer pricing system and attracted by a series of subsidy
programs that covered various aspects of the fertilizer chain,
from manufacturing to transport to storage to distribution and
consumption.
Five major subsidy programs, massive in scale and most
influential on the evolution of Chinas fertilizer industry, are
described here: (i) subsidies on electricity use at fertilizer
manufacturing plants, which were implemented through
preferential pricing granted by the National Development
and Reform Commission. In 2003 and 2006, the National
Development and Reform Commission directed electricity
price hikes for all industrial and commercial entities except for
the fertilizer industry. We estimated the amount of this subsidy
through the price-hike exemption to be $184 million in 2003,
growing to $433 million in 2010 (Table 2). (ii) Subsidies
on fertilizer transport through exemptions from the railway
construction fund (a charge of $0.0005 per ton km-1 instituted
by the Ministry of Railways in 1995 and still in effect today)
and several other price hikes (Table 3). Consequently, railway
transport expenses for fertilizer were <50% of the cost for
other commercial freight in most years since 2003 (Table 3).
The relevant subsidies amounted to $769 million in 2003 and
increased to $897 million in 2010. (iii) Exemption from value-
added tax (VAT), which constituted by far the largest subsidy
program for the fertilizer industry. During 2004 and 2005, a
reimbursement program was performed by returning 50% of the
VAT back to urea producers. Starting in 2006, the VAT exemption
was granted to all fertilizer products. These exemptions were
instituted by the government in response to industry complaints
about price surges of major production inputs (e.g., natural gas
and electricity) and to improve the competitiveness of Chinese
fertilizer producers after entering the WTO. We estimated
the VAT-related subsidies to be $871 million in 2004 and
$6,762 million in 2010 (Table 4). (iv) The fertilizer reserve
subsidy program, which aimed to stabilize fertilizer supply and
minimize peak season shortages. In this program, the enterprises
involved in the fertilizer reserve business use loans provided
by banks for purchasing urea and DAP products, and the
government pays the interest on the loans for the enterprises for
a storage period limited to half a year. As a result of the subsidy
program, off-season fertilizer reserves doubled from 2004 (8 Tg,
gross weight) to 2010 (16 Tg), and the number of enterprises
engaged in such reserve businesses grew from 20 to >90. We
estimated that the storage subsidy increased from $50 million in
2004 to $163 million in 2010 (Table 5). (v)The input subsidy
on fertilizer applications was implemented to ensure that farmers
can continue to afford fertilizers. According to government
sources (Ministry of Finance of China, 2010), this subsidy was
increased from $15 billion in 2006 to $105 billion in 2010
(Table 5).
The five programs described above granted the fertilizer
industry a total subsidy of $0.95 billion in 2003, which later
ballooned to $18.76 billion in 2010 (Fig. 1). This would
translate to $24 (in 2003) and $283 (in 2010) per ton nutrient
(N+P+K), lowering the retail price of fertilizers overwhelmingly.
For example, the retail price of urea-N nutrient increased from
$376 in 2003 to $582 in 2010; if the above-mentioned subsidies
were all granted to urea-N, its proportion in retail price of
urea-N would have increased from 6% (2003) to 49% (2010).
To put the total subsidies in perspective, some African countries
had national GDPs less than $10 billion in 2010 (World Bank
Organization, 2012).
Impacts of Policies on the Fertilizer Industry
and Beyond
In the past six decades, government control and
intervention of the fertilizer industry through price control
and subsidy programs have made monumental impacts on the
entire fertilizer chain, from manufacturing capacity to market
conditions to the affordability and accessibility of fertilizer
products for the end user. The impacts have extended far beyond
the industry per se, affecting fertilizer use behavior by Chinas
increasingly diverse farming community and contributing to
serious environmental problems.

Table 2. Fertilizer production, electricity usage, and estimated subsidies provided by Chinese government (20032010).

Fertilizer Annual production

Electricity use
products 2003 2004 2005 2006 2007 2008 2009 2010
kWh Mg-1 Tg
Urea 112 36.9 41.8 42.2 48.5 54.0 56.3 63.8 54.7
AN 22.3 0.66 0.66 3.68 3.29 3.95 3.75 3.46 4.26
ABC 40 36.6 39.5 40.1 38.6 32.8 32.1 26.7 24.0
ACL 310 4.00 5.28 4.44 5.95 6.97 8.28 8.82 9.20
SSP+FMP 24 32.9 33.5 31.9 27.87 25.6 24.1 23.2 28.3
MAP 133 3.27 4.36 5.80 7.30 9.50 8.35 8.63 11.34
DAP 40.4 3.04 4.43 5.06 6.00 6.87 8.10 10.3 11.7
TSP 53 0.39 0.84 1.05 1.07 1.20 1.45 1.33 1.70
NP 96 0.83 0.83 0.59 0.66 0.63 0.75 0.81 0.47
MOP 126.9 2.74 3.43 3.88 3.48 4.17 4.62 6.05 6.61
NPK 36.6 8.47 7.01 8.99 11.9 13.1 8.82 9.15 9.17
Electricity use Billion kWh 8.96 10.3 10.5 11.8 12.9 13.3 14.4 14.0
Market price USD kWh-1 0.06 0.06 0.06 0.07 0.07 0.07 0.08 0.08
Preferential price USD kWh-1 0.04 0.04 0.04 0.04 0.04 0.04 0.05 0.05
Annual subsidy# Million $ 184 209 265 313 358 417 444 433
AN, ammonium nitrate; ABC, ammonium bicarbonate; ACL, ammonium chloride; DAP, diammonium phosphate; FMP, fused calcium magnesium
phosphate; MAP, monoammonium phosphate; MOP, muriate of potash; NP, nitrate phosphate; NPK, complex fertilizer; SSP, single superphosphate; TSP,
triple superphosphate.
Data of electricity use for fertilizer production were collected from the China Fertilizer Manual, 2001 (Fan et al., 2001).
Data of annual fertilizer production were collected from National Statistics Bureau of China (2011a).
The market and preferential price of the electricity are not fixed nationwide; We averaged the price data which are collected from 25 cities in different
provinces to compare the differences between market and preferential price of the electricity.
# Estimated as annual output of chemical fertilizer electricity use per unit fertilizer subsidy per unit electricity used.

Table 3. Estimated subsidy on the railway transportation of fertilizers (20032010).

Fertilizer transported Freight charges of Freight charges of Subsidy on railway
Year
by railway other products fertilizer transportation
Tg USD t-1 million $
2003 130 10.4 4.47 769
2004 142 10.6 4.55 855
2005 148 11.8 4.96 1012
2006 154 12.4 5.67 1131
2007 159 13.4 5.31 1281
2008 157 15.8 7.03 1370
2009 162 16.1 9.03 1145
2010 127 17.3 10.2 897
The amount of fertilizer transported by railway was collected from the National Statistics Bureau of China (National Bureau of Statistics of China,
2011a).
The freight charges are collected from Ministry of Railway of China (Ministry of Railway of China, 2012).

www.agronomy.org www.crops.org www.soils.org 975

A Robust Industry with a Burgeoning Network Table 4. Total subsidy on value-added tax in fertilizer production
in China.
Half a century ago, Chinas fertilizer industry was essentially
Gross production value Subsidy on VAT
nonexistent, and total production was a mere 0.4 Tg in Year Coefficient
of fertilizer industry exemption
1960. Today, it is a conglomerate with global impacts and an billion $ million $
annual output exceeding >50 Tg (NPK nutrients). Growth in 2004 21.8 0.08 871
production accelerated particularly in the 21st century. From 2005 29.8 0.08 1192
2000 to 2010, nearly 60% of the annual increase in global 2006 36.8 0.08 2947
fertilizer production was in China (International Fertilizer 2007 47.3 0.08 3786
Industry Association, 2012). The 2010 data showed that total 2008 66.3 0.08 5301
nutrients of N, P2O5, and K2O products were 36.1, 14.4, and 2009 66.4 0.08 5308
2.7 Tg, which accounted for 34, 38, and 13% of world fertilizer 2010 84.5 0.08 6762
output, respectively. Also, China became a net exporter of
Data of output value of fertilizer industry were collected from China
N (2.3 Tg) and P fertilizers (1.8 Tg as P2O5) (International National Chemical Information Center (personal communication).
Fertilizer Industry Association, 2012), although it remains According to previous research (Zhang et al., 2007), after deducting
a net importer for K (0.9 Tg imported in 2009). Moreover, the input taxes, the fertilizer industry should pay the taxes at 8%
the mix of fertilizer products has changed from lower-grade of the production value of the fertilizer industry, so the subsidy on
ammonium bicarbonate and single superphosphate to higher value-added tax (VAT) exemption = the gross production value of
the chemical fertilizer industry 8%. During 2004 and 2005, a VAT
analysis and better quality materials such as urea, DAP, and subsidy program was carried out by returning 50% of the VAT back to
NPK (compound fertilizer). For instance, production of producers.
compound NPK fertilizers was nil before 1980 but was >50 Tg
(NPK nutrients) in 2010. to >6000 in 2010. This increase in producers in the compound
The economic reform in general, and heavy subsidies for the fertilizer industry generated fierce price competition. However,
fertilizer industry in particular, has spurred the emergence of most manufacturers were determined to lower the production
numerous enterprises that form the vast network comprising cost rather than invest in updating technologies and improve the
Chinas fertilizer chain (Fig. 2). At the upstream end, about quality of products to win the market, leaving the poor quality
1200 individual companies are engaged in making basic of compound fertilizers as a recurring issue. Today only 3% of
materials (e.g., ammonia synthesis and phosphate, sulfur, and NPK products reasonably match crop nutrient requirements,
potash mining) for the manufacturing of various fertilizer leaving the fertilizer quality problem far from solved (Li et al.,
products (e.g., macro-, micro-, or compound fertilizers). 2011). In addition, subsidy programs have exerted a negative
The compound fertilizer producers involve >6000 separate impact on efficient use of resources (Gu and Hu, 2004). For
companies. The fertilizer midstream features roughly 3000 instance, energy consumption for NH3 synthesis in China
wholesalers and 100,000 retailers through which transactions is 51.3 GJ t-1 NH3N, compared with the world average
take place, and the commodity finally reaches the end users at (43.7GJt-1) and 32.8 GJ t-1 with the best available technology
the downstream end comprised of approximately 210 million (Zhang et al., 2013).
households in rural China. This vast network employs millions Fertilizer Affordability to the End User
of workers, producing and distributing >50 Tg of fertilizer
products annually. Throughout the 1950 to the 1970s, the fertilizer supply/
The gold rush stimulated by lucrative government subsidies demand relationship was out of balance, leading to severe
also brought potential problems. For example, the number of regional and national shortages due to low production capacity
compound fertilizer manufacturers ballooned from 614 in 2003 and limited importation. For the average farmer, ready access

Table 5. Estimation on subsidy for off-season storage and direct payments for farmers (20042010).
Subsidy on off-season storage Direct payments for
Year
Fertilizer storage Average price of fertilizers Bank interest Total subsidy farmers#
Tg USD t-1 % million USD billion USD
2004 800 238 5.2 50
2005 800 280 5.2 58
2006 800 283 5.6 63 15
2007 1000 311 6.5 101 37
2008 1600 459 6.1 225 69
2009 1600 360 4.9 140 111
2010 1600 366 5.6 163 105
Data of fertilizer storage were collected from National Development and Reform Commission (2011).
The fertilizer storage was based on urea, diammonium phosphate, and muriate of potash products, so we averaged the prices of these three products.
The price data were collected from China Fertilizer Information Weekly published by the China Fertilizer Information Weekly (Chen et al., 2011).
The bank interest rate was collected from China Minsheng Banking Corporate (2001).
The government will pay interest for 6 mo, so the subsidy on interest payment = (reserve amount fertilizer price interest)/2.
# Data of direct payments for farmers were collected from Ministry of Finance of China (2010).

976 Journal of Environmental Quality

to ample and diverse fertilizer products
did not occur until 1990s. Compared
with long-term scarcities, affordability
has not been an issue since then because
fertilizers have been kept at artificially
low prices for the past two decades
(1990s2010s). Even after the removal
of price caps in 2009, fertilizer prices
remained relatively low, owing largely to
the massive government subsidies. For
example, urea cost $391 per ton of urea
products in 1949 and $268 in the 1950s
and 1960s, with the lower price being
mandated by the government (Fig. 3).
Beginning in the 1970s, China started
its own urea production line, and urea
prices decreased from $239 to $109 per
ton between 1976 and 1992. Since 1998, Fig. 1. Annual indirect and direct subsidies provided to the fertilizer industry and farmers in China
from 2003 to 2010. Subsidy includes preferential price of electricity use for fertilizer production,
when the market-oriented system was special price for fertilizer transportation by train, the exemption of value-added tax (VAT) from
instituted, urea prices have fluctuated fertilizer producers, the bank interest payment for off-season storage, and direct payments to
but have remained within a narrow farmers on fertilizer use. Data were collected from Tables 2, 3, 4, and 5.
range, from $185 to $268 per ton (a 45%
and management practices, and nutrient management)
variation). In comparison, the cost of urea fertilizers in the
contribute to the lower yields in China as compared with the
United States ranged from $176 to $448 per ton between 1976
and 2010 (a 155% change). European Union or the United States, a detailed discussion
Low and stable fertilizer prices have been essential in of which is beyond the scope of the present work (Chen
promoting the widespread adoption of fertilizer use by et al., 2011). Nevertheless, the greater N applications and
hundreds of millions of Chinese farmers, contributing to the lower crop yields in China as compared with the European
vast increases in grain production in the nation (Fan et al., Union or the United States inevitably lead to lower N use
efficiency and greater N losses to the environment. Much of
2012). On the other hand, the artificially low prices, largely
the N losses occur as gaseous N compounds (NH3, N2, and
achieved by the use of heavy subsidies, have obscured the real
N O) emitted to the air or as nitrate in surface water runoff
financial burden of fertilizer production and related processes. 2
and leaching to groundwater. For example, of the N applied
Furthermore, artificially low prices constitute an important
factor that has led to the injudicious use of
fertilizers, resulting in nutrient enrichment of the
nations soils, waters, and air.

Accelerated Nutrient Losses

and Pollution Problems
The excessive use of fertilizers in China has
been well documented (e.g., Ju et al., 2009; Chen
et al., 2011). This is particularly true for N, which
constitutes 68% of Chinas total fertilizer output.
The extent of fertilizer overuse can be illustrated
at the national or regional scale. In 2010, fertilizer
N application for wheat production averaged 215
and 193 kg ha-1 in China and the United Kingdom,
but the United Kingdoms wheat yield was 1.6
times that in China (FAO, 2012; Department
for Environment, Food and Rural Affairs of UK,
2011). Similarly, Chinas corn crop received N
fertilizers in amounts 51% greater than in the
United States (China: 209 kg N ha-1; United
States: 138 kg N ha-1) but with a yield 43% lower Fig. 2. Fertilizer industry chain and network in China. Numbers denote the total counts
than in the United States (FAO, 2012; USDA, of companies engaged in a specific fertilizer dealing business. Data were collected
from China Nitrogen Fertilizer Association, China Phosphate Fertilizer Association,
2011a). Many natural and managerial factors China Potash Fertilizer Association, Department of fertilizer quality supervision and
(e.g., different degrees of water and nutrient inspection. ABC, ammonium bicarbonate; AN, ammonium nitrate; AS, ammonium
availability, climate conditions, crop genetics sulfate; DAP, diammonium phosphate; MAP, monoammonium phosphate; TSP, triple
superphosphate.

www.agronomy.org www.crops.org www.soils.org 977

 not returned to soils are a waste of valuable resources
but, more importantly, exacerbate pollution problems
(Withers and Lord, 2002; Cherry et al., 2008)
because the practice of field burning of crop residues
contributes to air quality decline and uncollected
animal wastes directly entering local waterways
destroys aquatic life (Yang et al., 2008). Furthermore,
not returning organic materials to soils translates
to lost opportunities to maintain or enhance soil
quality, especially through sustaining soil organic
matter content, alleviating soil acidity, and enhancing
microbial and biological activities (Guo et al., 2010).
To a large extent, we believe that the widespread
failure to efficiently use Chinas vast supply of organic
resources is associated with the availability of cheap
chemical fertilizers to farmers. Another contributing
Fig. 3. Price of urea paid by farmers in China and the United States, in US$ per Mg
(or ton) of bagged urea fertilizer. *Data of urea price paid in China were collected factor is the lack of a national policy to establish the
from National Bureau of Statistics of China (2011b). **Data from the United States infrastructure needed to collect, store, distribute,
were collected from the USDA (2011b). and apply organic wastes from concentrated animal
feeding operations to Chinas smallholder farms, thus
during the wheat and maize growing seasons on the North
allowing farmers to reduce chemical fertilizer use.
China Plain, 19.4% (wheat) and 24.7% (maize) of N was lost
through ammonia volatilization, whereas 2.7 and 12.1% was
lost through leaching ( Ju et al., 2009). Nationwide and on an Fertilizer Use and Management in China:
annual basis, roughly 26.7 Tg of N was potentially lost from The Way Forward
the agricultural production system in 2005 (Ma et al., 2010); With decades-long efforts and progressive policy provisions,
this would account for 88% of the amount of N in synthetic China has built a massive fertilizer industry with a total annual
fertilizer produced domestically in 2005. production (53.1 Tg NPK) exceeding domestic consumption
Although ample and affordable chemical fertilizers have (48.9 Tg) and now ranking highest in the world (International
become the backbone of Chinas agricultural production, Fertilizer Industry Association, 2012). However, the nutrient
neglecting to consider nutrient elements in organic resources pollution issues discussed above have become the greatest
(e.g., animal manure, crop residues, sewage sludge, and other challenge facing the industry (and the country). We believe that
organic wastes) has become a serious problem. The total the first step to address these challenges resides at the policy level.
quantity of organic nutrients generated in China annually For decades, fertilizer-related policies and support programs have
quadrupled from 11 Tg in 1949 to 59 Tg in 2009 (Fig. 4). centered on a basic principle; that is, to safeguard the nations
However, the percentage of organic nutrients returned to food security by ensuring the availability and affordability
agricultural land has declined from >95% in 1949 to <54% in of fertilizers. It is time to review and reform the policies and
2005 ( Ju et al., 2005; Ma et al., 2010). This implies that roughly programs for the purpose of simultaneously addressing food
10 Tg N and 6 Tg P estimated to be contained in 3153 Tg of security and environmental sustainability. Although the issue is
animal wastes and 632 Tg of crop residues were not returned complex, there are a few viewpoints of greatest concern, which are
to agricultural land (estimated for 2005). Organic materials presented below to stimulate an extensive and thorough debate
on future fertilizer policies in China.
First, it is urgent to establish a sound
multidimensional information delivery
system that provides scientific and
technological services to farmers and
guides fertilization practices. Gross
overapplication of fertilizers is still
common in China ( Ju et al., 2009),
and the problem is rooted in the lack
of knowledge by end users because the
majority of the hundreds of millions of
farmers have received limited education
on the value and use of plant nutrients
(Huang et al., 2008). Therefore, timely
delivery of science-based fertilizer
Fig. 4. Total amounts of nitrogen (N), phosphorus (P), and potassium (K) in organic resources recommendations is essential for
produced and recycled back to soil and total amounts of NPK in chemical fertilizers used from improved nutrient use efficiency and
1949 to 2009. *Data of organic nutrients are recalculated based on NUFER Model (Ma et al., 2010).
**Data of the chemical NPK consumption are from National Statistics Bureau of China, 2009.
reduced overapplication of nutrients. Field

978 Journal of Environmental Quality

projects conducted in two of the most intensive double-cropping
systems in China, waterlogged rice/upland wheat in the Taihu
region of east China and irrigated wheat/rain fed maize on the
North China Plain, have demonstrated that, when following
expert recommendations, N fertilizer rates can be reduced by 30
to 60% relative to common farmer practices, with comparable
or even higher crop yields ( Ju et al., 2009). The importance of
extension services was demonstrated at the national scale when
the Ministry of Agriculture sponsored a Soil Testing and
Fertilizer Recommendation program in 20052010, which
covered 73 106 ha of all major cereal crops across the country
with 160 million farmers participating in relevant education and
outreach services in 2010 (Ministry of Agriculture of China,
2009). The Soil Testing and Fertilizer Recommendation project,
together with many other agronomic technologies, played a
major role in improving N fertilizer use efficiency; for instance,
the partial factor productivity of N fertilizers for cereal crops
increased from 17 kg kg-1 in 2004 to 21 kg kg-1 in 2008 (Zhang
et al., 2012). Although such outreach activities targeted to fixed-
term projects can be highly effective, what the country needs
in the long run is a perpetual network of trained and dedicated
extension professionals to deliver basic scientific knowledge at
the field level whenever needed. Historically, China has lacked
a wide-reaching and functional extension system. According to
one report, there were only 11 technicians to provide services for
20,000 farmers in one county; at the township level, extension
personnel, if any, have become fertilizer salesmen or engaged in
other unrelated activities (e.g., family planning) (Wang et al.,
2011). We strongly urge policymakers to take action to build
up a reliable, coordinated, multitiered education and extension
network; governmental support in terms of financial investment,
infrastructure support, and capacity building will be essential.
Second, the vast amounts of organic nutrients generated
must be taken into account in the nations nutrient management
endeavor. Particularly critical is the management of animal
manure and its nutrients, which amounted to 15 Tg N and
10Tg P in 2009 based on our estimation. Proper management of
manure nutrients would substantially reduce chemical fertilizer
use (estimated to be 4.57.5 Tg N and 10 Tg P, assuming
fertilizer equivalence of 3050% and 100% for manure N
and P, respectively). This would translate to about the same
amounts of nutrients not entering the environment as potential
pollutants. Fortunately, a positive change has been happening
in recent years. Some local municipalities have set up incentives
or pilot programs aimed at enhancing organic waste utilization
and reducing pollution, led by the municipalities of Shanghai
(in 2004), Jiangsu Province (in 2006), Beijing (in 2007), and
Shandong Province (in 2008). To our knowledge, there were
15 such initiatives around the country in 2009, spending an
estimated total of $46 million in subsidies for straw recycling
and for the use of green manure and organic fertilizers. Given
the enormity of organic nutrients generated in the country and
the environmental importance of better management of this
national resource, it is imperative to develop nationwide policies
to expand the local successes. For the long run, we believe it is
in Chinas best interest to allocate resources for developing cost-
effective alternative technologies that can convert its vast amount
of organic resources into bioenergy and easy-to-transport
nutrient products for use in a wide range of agricultural systems.
www.agronomy.org www.crops.org www.soils.org 979
Technological innovation is needed within the fertilizer
manufacturing sector for enhanced production efficiency and
environmental sustainability. Many fertilizer manufacturers use
outdated technologies that are high in energy consumption as
well as emissions of air pollutants. Life cycle analysis indicated
that greenhouse gas emissions amount to 13.5 t CO2eq t-1 N
from Chinas N fertilizer chain, which is 30% greater than the
European Union (Zhang et al., 2013). Total GHG emissions
from Chinas N fertilizer chain amounts to 452 Tg in 2010, which
is 7% of the annual emission from the entire country. Fortunately,
Chinas 12th 5-yr plan (20112015) emphasizes the need for
environmental quality improvement in Chinese rural areas, and
the new leadership of China has established a goal of transforming
China into ecological society by 2020, which refers to a society
with a low carbon economy and environmentally friendly
lifestyle. Therefore, technological upgrading and innovation is
essential to ecologically oriented production. Moreover, policy
initiatives are needed to promote the development of new
fertilizer products that can help lower the environmental burden
(e.g., slow-release N fertilizers, compound fertilizers better
balanced with crop NPK requirements) or better meet emerging
needs in the field (e.g., fertigation devices). Developing such
products is typically associated with considerable research and
development spending as well as business risks, and government
backing in such endeavors could spur changes that benefit the
economy, the farmer, and the environment.
In addition, China must strengthen its relevant laws and
regulations to govern the management of fertilizer products
and their uses. More affluent societies have established
laws and regulations in recent years to govern nutrient
management practices for environmental purposes. For
example, The European Unions Nitrate Directive provides
the legal basis for member states to develop nutrient
management plans, which in essence caps N application via
livestock manure to 170 kgha-1 (Oenema, 2004). The United
States, as required by its Clean Water Act, has concentrated
animal feeding operations rules that regulate discharge
losses at the production facility and nutrient management
activities at the farm level, including record keeping of
fertilization activities. In China, however, despite a number
of agriculture-related laws (e.g., Chinese Agricultural
Law, Basic Farmland Management Regulations, Law of
Agricultural Technology Extension), there are no clearly
defined rules and guidelines focused on agricultural nutrient
management for environmental protection, except for some
vague statements requiring agricultural producers to manage
fertilizers in reasonable manners. Another deficiency is
the lack of a mechanism to oversee and manage registration
and quality control of fertilizer products. Many developed
countries have fertilizer laws (e.g., Canadas fertilizer law in
1985, Japan in 1950, European Union in 2003) to govern the
registration of fertilizer products with specified standards
in order for a product to enter the market; violators are
punished duly (Wang et al., 2011). In China, however, several
government agencies are involved in fertilizer management
(e.g., Committee of National Development and Reform,
Ministry of Agriculture, Ministry of Commerce, Ministry
of Industry and Information Technology, Bureau of Quality
Supervision, Bureau of Industry and Commerce), but there
are no uniform and clearly defined instruments for product
registration, labeling, monitoring, and quality control. As
a result, poor quality or bogus products (i.e., the nutrient
content is not same as the package information) infesting
the market has been a perennial problem (Wang et al., 2011).
In our view, China needs fertilizer laws to establish the legal
base and centralize the management responsibility from the
various government branches under one authority. Such legal
measures, together with a multidimensional information
delivery system and other mechanisms to manage fertilizer
and organic nutrients are essential to Chinas quest for food
security as well as environmental sustainability.
We believe that Chinas fertilizer related policies and subsidy
programs need to be reviewed and reassessed for needed
changes in light of the dual priorities of producing more food
to meet growing demands and protecting the environment
for long-term prosperity and sustainability. We argue that the
massive national government subsidies used exclusively for
Chinas fertilizer manufacturing and distribution sectors have
completed their missions and should be redirected toward
fostering technological innovation and broader programs that
help alleviate environmental damages associated with fertilizer
overuse and nonpoint source nutrient pollution. How would
such changes affect fertilizer availability and affordability,
and ultimately food security, for Chinas growing national
population? What alternatives exist that are cost effective,
socially acceptable, and environmentally sound? What strategies
can we take for a nondestructive transition from a system that
focuses on production only to one that addresses production and
sustainability? These are some of the key questions that deserve
the engagement of all stakeholders (i.e., policymakers, industry
leaders, farmers, researchers, environmentalists, and education
and extension personnel) for serious and thorough debates.
Conclusions
Fertilizer has played a key role in boosting agricultural
production and safeguarding food security in China during the
last six decades. An extensive series of national policies and support
programs have been highly effective in building up a robust
industry that is more than self-sufficient. However, artificially
low prices of fertilizer products, made possible largely by massive
subsidies, together with severe deficiencies in education and
extension efforts for end userslargely Chinas farmershave
contributed to a gross overuse of chemical fertilizers nationwide
and to negligence of the value of animal manure and other
organic nutrients to the national food security challenge. The
environmental consequences of this approach are manifested
today in large-scale air pollution, soil degradation, and water
quality decline throughout the country. We argue that further
reforms are needed in governmental policy, ultimately leading to
an integrated nutrient management policy based on three pillars:
food security and farmers income, environmental sustainability,
and resource use efficiency. Implementing integrated nutrient
management in practice requires a mix of policy instruments
including education, demonstration, regulations, and targeted
economic incentives.
Acknowledgments
This study was supported by the National Basic Research Program of
980 Journal of Environmental Quality
China (973 Program: 2009CB118608), the Innovative Group Grant
of Natural Science Foundation of China (NSFC) (31121062), and
the Special Fund for Agro Scientific Research in the Public Interest
(201203079).
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