China to cut import of cotton drastically

Market News

China to cut import of cotton drastically

China has indicated that the country will slash its cotton import quotas for next year. This is in a bid to boost demand for domestic fiber and get rid of the cotton stockpile that has been built since 2011. According to Liu Xiaonan, vice head of the economy and trade department, National Development and Reform Commission, China will only provide import quotas for 894,000 metric tons (4.1 million bales of 480 lb) of cotton which is required to offer at low duties under commitments to the WTO. China is the world's top consumer, importer and producer of cotton and has a large stockpile of cotton reserve which was built over last three years. Following this announcement, cotton prices across the globe including China, USA and India declined substantially. The country’s cotton reserve building process has supported the global cotton market in last few years.

In the past, in addition to the WTO compliant quota, China used to offer another type of quota which will no longer be available in the next year according to Liu. Non-quota imports are subjected to 40 percent import duty which will lower the Chinese appetite for foreign cotton.

China had earlier decided to end the cotton reserve building program and instead offer subsidies direct to farmers. Stock building jacked up domestic cotton prices, making import a cheaper option. The direct subsidy for cotton farmers would be available to Xinjiang province and extended to provinces in the Yellow and Yangtze River valley growing areas as per a new announcement.