Cotton Bulls Are Eroded.

First, The RMB exchange rate has been appreciated by the US dollar.

Due to the European sovereign debt crisis, the current Euro led the collapse of non US currencies and the rise of the US dollar. As the market worries about the economy are increasing rapidly, investors have withdrawn from the high risk positions in the stock market, commodity market and foreign exchange market, and the US dollar with risk avoidance function has been pushed up by a large number of purchases. From the beginning of December 2009 to the beginning of 2010, the US index once climbed to the top of the 88 position, rising to 19%, just behind the 25% rise of the US index after the outbreak of the financial crisis a year ago. The euro and the US dollar dropped more than 21% from the 1.51 high point, and also fell below the low point of the financial crisis.

In terms of the renminbi, because of the overall consideration of the RMB against international pressure and the dollar again after the outbreak of the financial crisis, the renminbi maintained a stable trend against the US dollar in the course of the European debt crisis. The US dollar is basically stable in the 6.8250-6.83 range with a narrow horizontal consolidation.

With regard to the issue of RMB exchange rate, the United States and Europe have repeatedly urged China to establish a more market-oriented exchange rate system and let the renminbi appreciate. Some US lawmakers have even accused China of manipulating the exchange rate to gain export price advantage. However, because Chinese officials have repeatedly stated that China will continue to steadily push forward the reform of the RMB exchange rate formation mechanism in accordance with the principle of initiative, controllability and gradualism, and will not be forced to appreciate appreciably under international pressure.

Therefore, in this case, it will undoubtedly be a tentative attack for the United States to borrow the Greek debt crisis to make a significant appreciation of the US dollar. Because the renminbi is pegged to the US dollar, if the US dollar appreciates substantially against other major currencies, then the renminbi will also appreciate accordingly, and the us can also try to find out the reaction of China. The latest figures released by the bank for International Settlements show that the real effective exchange rate index of the renminbi has started to appreciate, of which the main reason is the appreciation of the euro. At present, the renminbi has risen by more than 20% in the past six months against the euro, which has made China's exports to other major countries outside the United States vulnerable. Despite the fact that the change of policies during the financial crisis tends to stimulate domestic demand, exports are still the unshakable cornerstone of China's economic growth. Therefore, the fact that the RMB exchange rate has actually been appreciated by the US dollar is not a blow to China.

Two. Worries about Europe's debt crisis have not returned

During the long holidays, a series of optimistic economic data released by Europe and the United States increased investor confidence in the global economic recovery. The European Union statistics bureau announced 14 days that the industrial production in the euro area increased by 0.8% in April, up 9.5% from the same period in March, the highest increase in the past 20 years, indicating that the pace of economic recovery has accelerated. On the 15 day, Spain sold 5 billion 200 million euro 12 month and 18 month treasury bonds, showing good results. And the 2 billion 500 million euro bond sold in Belgium has also been oversubscribed. Investor confidence improved, easing concerns about Europe's debt crisis. In addition, the European Commission also predicts that Germany, Spain, Portugal and 9 other EU countries will achieve the target of budget deficit in 2010 as planned. Market confidence in the European economic recovery has increased, and European stock markets, U.S. stocks and commodity markets are bracing up.

In addition, a series of economic data released by the United States showed that the economy was still in a slow but steady recovery process, and the US inflation pressure remained moderate in May. The Federal Reserve Bank of New York announced on 15 th that in June, the New York manufacturing index rose slightly compared with May, rising for the eleventh consecutive month, showing its steady growth in manufacturing industry. The US Labor Department announced on 16 th that the producer price index in May was 0.3% lower than that in April after seasonally adjusted. On the 16 day, the Federal Reserve announced that the industrial output value increased by 1.2% in May, which was 0.8% higher than the average market expectation. Industrial output increased by 0.8% in April. But the disappointing housing data set the market under pressure. The US Department of Commerce said 16 days that the new housing starts in May dropped to 10% to 593 thousand per annum, and that the construction license decreased by 5.9% to 574 thousand per annum, less than expected.

However, Moodie, an international credit rating agency, once again lowered the rating of Greece's sovereign debt in June 14th, dropping from A3 to Ba1, dropping 4 grades and becoming a junk level. Once again, the European debt crisis did not go far. The European Union's economic policy research center (CEPR) and the Italy Central Bank jointly compiled activity indicators, indicating that the EuroCoin index in the euro area has declined for the second consecutive month in May, which is used to measure the economic growth rate in the euro area, suggesting that economic growth will slow down. Europe's growth prospects are facing greater uncertainty. Although stronger economies such as Germany, France and Britain are still expected to maintain their recovery, they are still unable to rule out the risk of default, thanks to the sovereign debt crisis spreading to the banking sector and the government's efforts to actively reduce the deficit. The results of stress tests conducted by the European Central Bank on banks are worth our attention, and the results are expected to be released in the coming weeks.

I believe that as European countries try their best to cut public spending and rebalance their debts, the tighter fiscal policy will shrink, and this deflation effect will spill over. This is undoubtedly a good start for the euro zone economy, which has just been out of recession and is recovering weakly, and the future economic outlook has become even more bleak. Although the EU and IMF have jointly carried out crisis relief, the large-scale rescue plan does not mean that the European sovereign credit crisis will be over the rainy day, because it is impossible to use more new debt to solve the problems caused by huge debts and excessive consumption, especially when the debt paying ability of these countries is obviously weak. At the same time, it is difficult to recover the declining trend of the euro in the medium term. After all, there is no new economic growth point, high unemployment rate, serious aging of population, and high social security costs. Worries about Europe's debt crisis remain.

Three. China's export decline is likely to increase

Under the influence of the international financial crisis, China's foreign trade development situation has become more and more serious, focusing on many aspects, such as insufficient external demand, rising export costs and fierce competition in the international market. At the same time, the situation of China's trade frictions is even worse. China has become the first target country and the biggest victim of trade friction, and the increasing trade friction has weakened the international competitiveness of China's export products, increased the difficulty of expanding the international market, and increased the external risks of China's economic operation. The outbreak of the debt crisis in Europe has undoubtedly exacerbated the threat faced by China's huge export market. Although the extent of this impact is not yet clear, the sharp appreciation of the renminbi against the euro has led to a sharp decline in China's export competitiveness to Europe, and trade exports are under pressure.

The European debt crisis is slowly penetrating into China through the exchange rate mechanism, and exchange rate fluctuations will directly affect China's light industry, textile, electronics, machinery and electrical industries. The four industries are characterized by labor-intensive, low added value and relatively large export scale. The exports of four industries account for 70% of industrial exports. If exports decline, these industries will have a significant impact on these labor-intensive industries. The results of the RMB stress test results from some labour intensive trade associations show that if the RMB appreciation is too fast, enterprises will face the risk of a sharp decline or even a loss in profits. Due to the low profit margins and poor bargaining power of the labor-intensive industries, the appreciation of the renminbi will have a significant impact on them.

Four. Where will cotton prices go?

1, the government will regulate the textile industry for a long time.

According to the state's "textile industry adjustment and revitalization plan", the textile industry is an important livelihood industry, and the textile industry is the important pillar industry of our national economy. First, from the domestic situation, the textile industry will be an important livelihood industry in China for a long time. The total consumption of the 1 billion 300 million population determines that the domestic demand market must rely on China's own textile industry. The textile industry absorbs 20 million of the labor force, of which 80% comes from the countryside. The annual output of cotton, wool, hemp and silk in China is about 9000000 tons, which is related to the livelihood of 100 million farmers. Two, from the international situation, the textile industry is one of the obvious industries of China's international competitive advantage (310368, fund bar). It occupies about 1/3 market share in the global textile trade market. In the global textile industry, it has the irreplaceable position of complete industrial chain, strong supporting ability, clear division of labor and low labor cost, and it will not change for quite a long time. Therefore, in bad conditions, it is inevitable for the government to escort the textile industry.

In May 2010, in order to ease the supply and demand situation of raw material cotton market, the NDRC issued an additional 800 thousand tons of cotton import quotas, and said that the next step would be to continue to increase import quotas in light of market changes and textile demand.

2, under the current economic situation, cotton is facing "fatal" uncertainties.

According to the May economic data released by the National Bureau of statistics, the relevant economic data on the operation of the national economy in May were released in June 11th. Consumer prices rose 3.1% over the same period, food prices rose 6.1%, non food prices rose 1.6%, and the ratio fell by 0.1%. The factory price of industrial products rose 7.1% compared to the same period last year.

From the data point of view, the CPI rise in May is still a structural rise: first, the influence of the tail factor. As the CPI fluctuated in May last year, the upward pressure on the price formation this year pushed CPI up 1.8%; two, the new price increase factor was mainly caused by the rising prices of food and housing, and promoted CPI up 1.3%. The cardinal effect has also increased the PPI growth. PPI rose 7.1% in May, up 0.6% from a year earlier, a 20 month high compared to the same period last year. The tail factor pushed PPI up 3.6 percentage points.

Although the state has repeatedly said that the domestic economy will not stagflate, but the situation is not optimistic is very obvious. From the current situation, on the one hand, prices continue to rise in inertia, on the other hand, industrial and investment data growth is slowing down, under the European debt crisis and the domestic real estate market tightening policy, the pressure of the economy can be imagined.

From the point of view of exports, according to the latest data released by the General Administration of customs, China's textile and apparel exports totaled 70 billion 200 million US dollars in 1-5 months in 2010, an increase of 19.3% over the same period last year, a 3.8 percentage point increase compared with the growth rate of 1-4 months in 15.5%. Among them, the total export of textiles was 28 billion 600 million US dollars, the total export volume of clothing was 41 billion 700 million US dollars, and the total export growth in 1-5 months was 29.7% and 13.1% respectively. In the month of May, China's exports of textiles and clothing amounted to 16 billion 400 million US dollars, an increase of 33.7% over the same period, an increase of 13% over the same period, of which the textile exports amounted to 7 billion US dollars per month, up 42.4% over the same period last year. From the proportion of export areas, textile and garment exports accounted for 46% of the top three regions, 24% of Europe and 16% of North America. The United States, the European Union and Japan are still the main markets for China's textile and clothing exports. The total of the three regions is 46.93% of the total textile and clothing exports.

Textile and garment exports to the United States, ASEAN and other regions have been remarkably resuscitation, and the impact of the European debt crisis has not yet appeared. However, the author believes that the strength of export data is more driven by the low base number. From the various external factors affecting exports, the unemployment rate in developed countries such as Europe, America and Japan is still at a high level. Once the economy is down and the financial sector tightens, the demand will continue to decline. With the continued depreciation of the euro, the passive appreciation of the RMB is an indisputable fact. The export situation of cotton textile industry in the later stage may show a clear downward trend. This will be a blow to cotton prices. From the present point of view, the tight supply and demand in the cotton market is the root cause of the price increase. However, with the fall in demand, the supply and demand will be eased, and the factors that cause the decrease of supply will have a long time to digest.

Therefore, there is a fatal uncertainty on the basis of the "bull market" of cotton prices.

Five. conclusion

To sum up, the European debt crisis is continuing, and the worries faced by the economy have not diminished. In the domestic market, prices are continuing to rise, and the growth of industrial and investment data is slowing down. Under the European debt crisis and the domestic real estate market tightening policy, the economy is facing greater risks. Although cotton has been supported by the tight supply and demand of the industry, but once the economy is weakening, the market demand will change, and the economic situation is lower than the market expectation. It will also cause heavy psychological pressure on the market psychology.