China has become the largest cotton importing country 　　 　　in the world, while its own industry has atrophied
　　
　　With Chinese textiles widely sold around the world, raw cotton, has become the most salable agricultural product in China. Today, the country is the biggest cotton buyer in the world, and the United States has become the biggest supplier of cotton to China. According to U.S. official statistics, China imports half of America’s annual cotton exports each year.
　　Dean Turner, Vice President of American Cotton Inc., predicted that the slower growth of China’s cotton output compared with the fast increase in the needs of the country’s textile industry will lead to a shortage of about 3 million tons in cotton supply this year. “In the next five to 10 years, China will still be a large textile exporting and cotton importing country,” he added.
　　“China is the hope for U.S. cotton producers,” said Jeff Coey, Director of the Cotton Council International for China and Southeast Asia, which is the international division of the National Cotton Council of the United States.
　　In the Chinese market, domestically produced cotton is far less welcome than American imports. In 2005, China’s cotton output and planting area receded. According to the China Cotton Association, the country’s total output of cotton was 5.45 million tons last year, 870,000 tons, or 13.8 percent, less than in 2004.
　　While trade frictions over China’s textile exports, notably to the United States and Europe, have hampered the growth in the country’s textile exports, the general trend is still up. In addition, China has already reached textile agreements with the United States and the EU, making its future exports more predictable and controllable.
　　
　　Import boom
　　
　　Cotton is the second most important cash crop in China, after rape, with 46.2 million farmers growing it. But in recent years, imports have threatened the livelihood of the growers. “I haven’t planted cotton for many years because I couldn’t make money from it,” said Shi Guojun, a farmer in Weishi County, Henan Province.
　　Shi said the crop needs to be attended from February to November, but the income is fairly low. “In the past, one mu (0.067 hectare) of farmland could produce 75 kg of ginned cotton, but it could only produce 40 to 50 kg in the last several years because of heavy autumn rains. If 1 kg of ginned cotton is sold for 8 yuan ($1), 50 kg of ginned cotton can be sold for 400 yuan ($50). Taking into account 200 yuan ($25) of production costs, each mu of cotton can only earn 200 yuan ($25),” said Shi.
　　Weishi County has always been an important cotton-producing area. According to Chen Zhanwei, Party Secretary of the county’s Supply and Marketing Cooperative, cotton output in Weishi was 19,000 tons in 1990, but it has remained under 10,000 tons over the past several years.
　　Despite the shrinkage in China’s cotton output, demand in the Chinese market has further expanded, giving American cotton a chance to enter the market. According to a recent report released by Oxfam (Hong Kong), a non-governmental development and relief agency based in Hong Kong, the United States sold 1.06 million tons of cotton to China in 2004 against 48,000 tons in 2001. The amount was expected to reach 3 million tons in 2005, or about 50 percent of China’s total output in 2004.
　　According to the China Cotton Association, the CIF price of every ton of third-grade American cotton is 13,000 yuan ($1,600) currently, while the price of every ton of domestically produced third-grade cotton is 14,200 yuan ($1,749).
　　Yu Junli, chief analyst of Green Futures, said that although the United States is the second largest cotton-producing country in the world, its production costs are relatively high. In order to enhance the competitiveness of its cotton on the international market and expand exports, the U.S. Government provides American cotton farmers with abundant subsidies. The annual amount of subsidies surpasses $3 billion, accounting for 10-20 percent of total sales.
　　After surveying China’s two important cotton-producing regions in Gansu and Xinjiang, Oxfam (Hong Kong) estimated that American cotton imports might make China lose $208 million in income and 720,000 jobs in 2005.
　　Experts believe that China now faces an unfair international agricultural trade environment, with many countries and regions placing various technical trade barriers to its agricultural products, despite large amounts of subsidies provided by the U.S. Government and West European countries to local farmers.
　　Cheng Guoqiang, Deputy Director of the Research Department on Market Economy under the Development Research Center of the State Council, said, “Strategically, China needs fair trade rules to resolve the questions related to cotton, as well as those concerning agriculture, rural areas and farmers. China’s progress in international negotiations, which may resolve problems related to the market access for agricultural products and to domestic and export subsidies, will help form a fair and open international trade market for agricultural products.”
　　According to a resolution of the Ministerial Conference of the World Trade Organization held in Hong Kong at the end of 2005, developed countries will end subsidies for cotton in 2006. A research report recently released by the World Bank said that if developed countries stop their subsidies for cotton exports, the share of developing countries in the international market will increase to 85 percent in 2015 from the present 56 percent, and Chinese cotton farmers will benefit.
　　
　　Foreign business profit
　　
　　The huge gap in the Chinese cotton market is stimulating more countries to export their cotton to China. Meanwhile, while Chinese cotton producers are being squeezed by their counterparts’ generous export subsidies, foreign cotton dealers are making huge profits through price difference.
　　Guo Yi, President of Xinjiang Lopnur Textile Group, said, “When Chinese textile enterprises cannot bear the high costs of domestically produced cotton, they will turn to imported cotton. The high price of domestically produced cotton also offers opportunities for increasing the price of imported cotton, leading to losses for domestic cotton enterprises and a payoff for foreign business people.”
　　“At present, domestic cotton enterprises only care about their own interests and blindly bid up the price, as they have not formed the concept of making money for the whole industrial chain,” said Hong Gang, Vice General Manager of Hebei Baoding Yimian Group. “Under such circumstances, Chinese textile enterprises certainly prefer to use low-priced imported cotton. It is the irregular management of domestic cotton enterprises that enables foreign cotton dealers to make huge profits.”
　　In order to shorten the delivery time, foreign cotton dealers have changed their trading methods in China, eliminating such steps as inquiring the price, seeing samples, signing an agreement, shipping and taking delivery of goods. Instead, they now directly send their cotton to China’s bonded areas. Foreign cotton in bonded areas, which has formed a potential supply in the Chinese cotton market, does have exerted fairly great influences on China’s cotton price, leaving domestic cotton dealers in a passive situation.
　　In addition to regulating the competition of the cotton market, improving the quality of cotton is another important aspect for the development of China’s cotton industry.
　　Shi Jianwei, Director of the Cotton and Hemp Bureau under the All-China Federation of Supply and Marketing Cooperatives, said, “Compared to foreign products, Chinese cotton is inferior in its fiber quality, but quality is the most important element in market competition.”
　　Guo Linhui, head of a cotton processing factory in China’s northwest Gansu Province, also said that quality comes first. If quality cannot be improved, Chinese cotton cannot compete with foreign products in terms of price.
　　As a representative of Chinese textile enterprises, Hong Gang of the Hebei Baoding Yimian Group said, “The textile industry is the largest client of cotton. Facing severe international competition, the most effective and direct method to satisfy the needs of the rapid development of the textile industry is to enhance the government’s policy support for cotton farmers and the cotton industry, enlarge the planting area, increase the output of cotton, and reduce market risks caused by excessive dependence on imported cotton.”
　　

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