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Reduce the spread of cotton at home and abroad to ease pressure on textile companies
In recent years, the divergence between domestic and international cotton prices has continued to widen, placing significant pressure on Chinese textile companies. High raw material costs have made it increasingly difficult for these firms to operate efficiently. Starting this year, the government has decided to phase out the temporary cotton purchasing and storage policy, replacing it with a target price reform. This shift is expected to narrow the gap between domestic and global cotton prices, easing the financial burden on textile manufacturers.
The disparity in cotton pricing has been a growing concern for the industry. Due to China’s previous purchasing and storage policies, domestic cotton prices have remained significantly higher than international market rates. As global cotton prices have declined, the gap between domestic and foreign prices has widened, creating challenges for Chinese textile companies. This situation has led to increased production costs and reduced competitiveness in the export market.
According to Mr. Wang, a representative from a Hunan-based textile export company, the high cost of domestic cotton has made it difficult for Chinese firms to compete internationally. “Our costs are much higher compared to our overseas counterparts,†he said. “This has resulted in fewer orders and decreased profits.†Similarly, an executive from Hangzhou Light Industry Arts & Crafts Textiles Import & Export Co., Ltd. noted that some factories had to idle their production lines during peak seasons due to declining demand and shifting orders to countries like Vietnam.
Some companies have started sourcing cotton from abroad to reduce costs. For example, Hunan Yintai Textile Group now imports cotton yarn from Pakistan and India, where prices are significantly lower than in China. The price difference—around 12,000 yuan per ton for imported yarn versus 19,000 yuan for domestic cotton—has forced many companies to look outside their borders for more affordable materials.
Industry analysts, such as Sun Liwu from Zhuo Chuang Information Market, believe that the removal of the temporary purchasing and storage policy will lead to greater market stability. In the future, domestic cotton prices are expected to align more closely with international levels. According to industry sources, the implementation of the target price subsidy system in 2014 will allow market forces to play a more significant role, bringing domestic and foreign prices closer together.
Zhu Sujun, head of Shanshan Group’s International Trade Department, confirmed that export performance has been weak in recent years, with smaller order sizes and tighter margins. “The minimum order size has increased from 200-300 to at least 500 units,†he said, highlighting the growing pressure on the sector.
The cancellation of the temporary cotton purchasing and storage policy is seen as a positive development for the textile industry. Industry officials believe that the reforms will help reduce domestic cotton prices and improve the overall competitiveness of Chinese textile companies in the global market. A representative from a Shandong-based textile firm noted that the policy change would allow companies to access lower-cost cotton, reducing their reliance on expensive domestic supplies.
Overall, the transition to a target price system is expected to bring long-term benefits to the industry, making it more sustainable and competitive in the global market. With the price gap narrowing, textile companies are hopeful for improved profitability and stronger export performance in the coming years.
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