Gao Fang: A Wonderful Era Of Cotton In China

About cotton, almost anyone can be hyped up in 2010. As a result, it has been sold for ten years.

Why is cotton so "stir fried" and how to get rid of the fate of "being fired" and create a good era of "China cotton"?

Cotton is the second largest agricultural economic crop in China.

Reporter: in 2010, garlic, mung bean, ginger and later Apple were all "fried". So, why do you think it is difficult for cotton to escape the fate of being fired?

Gao Fang: the reason why cotton is hyped is not exactly the same as that of other agricultural products.

It is undeniable that the soaring cotton prices last year did contain a lot of speculation, but there were also factors such as the steel demand of textile enterprises.

In China, cotton is the second largest agricultural cash crop besides grain.

At present, the annual output of cotton in China is about 7 million 500 thousand tons, the annual average cotton consumption is about 11 million tons, and the annual import volume is about 3 million tons. Cotton output, consumption and import volume all rank first in the world.

The number of cotton producers in China reaches 120 million, and the number of employees in the cotton processing and circulation industry, textile and garment production industry and textile machinery manufacturing industry is less than 30 million.

China's cotton industry has not only solved the problem of China's about 1000000000 population dressing, but also solved the employment problem of about 150 million of the population, and because 1/3's textile and clothing for export, it has become an important source of China's export earnings.

Based on the decisive role of cotton industry in China's economic scale, how to guide its healthy and orderly development is bound to become an important aspect of macroeconomic regulation and control.

Marketization and internationalization of cotton price formation mechanism

Reporter: is it necessary for cotton to pay attention to a large number of domestic and foreign hot money?

Gao Fang: the marketization and internationalization of the cotton price formation mechanism is a double-edged sword. It not only promotes the improvement and rapid development of the cotton market mechanism, but also comes with market risks.

In 1998, the State Council issued the decision on deepening the reform of the cotton circulation system. By 2001, the document issued by the State Council "further deepening the reform of the cotton circulation system" clearly defined the release of cotton purchase, broke the monopoly operation, separated the cotton reserve from the operation, and the domestic cotton purchase and sale price was formed by the market, and the country no longer unified the pricing. This marks the end of the cotton planned economy era in China, and the beginning of the domestic cotton price is really formed by the market.

In 2003, in addition to the additional 856 thousand tons imported from the WTO, the state also launched a large number of 1 million 500 thousand tons of imported cotton quotas, but the duty rate was 1%. This marks the beginning of the linkage between China's cotton prices and the international cotton prices.

Of course, in recent years, a quota tax has been imposed on quotas other than 1%, which has certain restrictions on the integration of domestic and foreign cotton prices.

In 2004, cotton became a trading item in China's futures market. Cotton futures prices began to affect spot prices. The price of domestic cotton futures followed the trend of US cotton futures in most cases, thus making domestic cotton prices more closely linked to international cotton prices.

To some extent, futures financial instruments also provide opportunistic opportunities for hot money.

Although the liberalization of cotton price formation mechanism provides some possibilities for speculation, it is of great significance and role for the future development of cotton industry. The marketization and internationalization of cotton price formation mechanism is an inevitable trend.

Industrial market development and national macro regulation

Reporter: the higher the market level, the industry more needs the national macro-control, what do you think of it?

Gao Fang: the market and internationalization of the industry conforms to the trend of the development of the market economy, but the problems and the hidden crises in the process of marketization and internationalization can not be avoided by the means of the market.

Especially in grain, cotton and other important commodities, national macro regulation is indispensable.

In recent years, cotton prices at home and abroad are also rising and falling. At a low level of less than 10 thousand yuan per ton, when the height is high, 30 thousand yuan per ton and cotton prices are too low, which seriously harms the interests of cotton farmers, dampens the enthusiasm of cotton growers, and damages the interests of textile and garment enterprises and consumers when the cotton price is too high.

At present, there are some problems in China's cotton industry. To solve these problems, we must rely on the effective regulation of the state besides the adjustment of the industry itself.

Especially when China's cotton industry has been highly marketed, how to use macro control means to deal with emergencies is very critical.

The state's application of the macro-control means will directly affect the healthy development of China's cotton industry in the future, and even affect the development of China's economy and social stability.

Stable production is the foundation of China's cotton industry development.

Reporter: how do you think cotton production can be stabilized?

Gao Fang: China's arable land is limited and there is a serious contradiction between grain and cotton. The ups and downs of cotton prices, the impact of natural climate, the characteristics of cotton producers in China and the complete autonomy of planting cause the domestic cotton area and output to fluctuate greatly, which is extremely unfavorable to the stable development of China's cotton industry.

Judging from the current national conditions, the cotton planting area is more stable than 80 million mu, and then the domestic cotton output will be stabilized at 8 million ~900 million tons, plus some imports, so as to stabilize domestic cotton supply and basically meet the domestic cotton consumption.

The most fundamental and effective measure to solve the problem of cotton planting area stability is the minimum purchase protection price system implemented by the government.

The minimum protective price should be based on the comparison of grain and cotton prices and the price of cotton and other commodities, the supply and demand of cotton at home and abroad, the cost of cotton production, and the price of labor.

Some subsidies can also be imitated by countries with better agricultural subsidy policies.

Of course, when the subsidy policy is put forward, it will be opposed by many people. The reason for this objection is that subsidies after the entry of WTO are contrary to the provisions of WTO and the trend of global economic integration.

However, the implementation of subsidy policy will ultimately depend on whether it is in line with the interests of the country, rather than depending on the rules of a game. Therefore, in the United States, which has the highest marketization level, the government should subsidize farmers in cotton production for at least three or more.

Scientifically adjusting the quantity of imported cotton is conducive to market stability.

Reporter: what do you think about the role of imported cotton in regulating the market?

Gao Fang: it is very important to adjust the quantity of imported cotton scientifically and stabilize the cotton market in China.

When China joined the WTO, it promised to import 894 thousand tons of 1% tariff per year, and now China's cotton shortfall is far more than this amount. Every year, the country has issued 1% quota of cotton import quotas outside the tariff range. The part of the issuance rate is sliding rate, and the sliding rate is taxed at the rate of 5%~40%. The base price is 11397 yuan / ton. In 2008, the benchmark price is calculated at a fixed rate, plus 570 yuan / ton.

The quota of the additional issuance is mainly determined by the national development and Reform Commission according to the size of the domestic supply and demand gap this year, but a key problem here is the inaccuracy of the domestic production and consumption statistics, resulting in frequent or rare issuance.

Too much, may import too much impact on the domestic market or enterprises do not import waste quotas, too little can not meet domestic demand.

Therefore, accurately grasping the output and dosage is particularly important for the regulation of the issuance quota.

The issuance of tariff quotas is based on the supply and demand of domestic market, the quantity can be relaxed appropriately, and the validity period of quotas can be extended appropriately.

This is convenient for all kinds of subjects to grasp the timing of imports in a flexible way according to market changes. It can also avoid leaving the opportunity for foreign funds and cotton traders to raise the price of cotton speculation because of the centralized distribution of domestic quotas.

Giving full play to the risk avoiding function of cotton futures

Reporter: what is the role of cotton futures?

Gao Fang: at present, there are some problems in China's cotton futures trading market, resulting in the function of avoiding risks in the futures market has not been fully realized. It is specifically manifested in the lack of understanding of some of the main bodies in the cotton industry and the serious lack of corporate participation in hedge and speculative funds. Even cotton enterprises with loans from agricultural development banks are not allowed to participate in futures trading. As cotton producers, cotton growers are not involved in futures trading, and textile enterprises as cotton consumers are also few in the futures market, resulting in the formation of futures prices which are not representative, and the function of evading risks is difficult to fully realize.

The domestic and foreign cotton spot price formation mechanism is different. Most of the imported cotton prices are based on the increase of the US cotton futures settlement price at the same day, while the domestic spot quotation is not closely linked to the futures price, which also increases the difficulty for the operator to hedge risk by using hedging.

Therefore, the government should improve the development of futures trading market, and guide the main body of cotton market to actively participate in futures trading and avoid operational risks.

Promoting brand of Chinese cotton with a brand new image

Reporter: how do you see the brand development of cotton in China?

Gao Fang: brand development is the inevitable requirement for the healthy and sustainable development of China's cotton industry. Therefore, in 2010, the China Cotton Association promoted the COTTON CHINA logo.

The purpose is to build brand of the industry with the concept of "high quality, pure cotton and environmental protection" as the carrier and promote the quality management and integrity management of raw cotton and cotton production enterprises, enhance the overall quality level of China's cotton and cotton products, and enhance the competitiveness of China's cotton and cotton products.

The promotion of this logo is conducive to enhancing the competitiveness of cotton and cotton textiles in China.

China's cotton 99% is hand picked cotton, has good quality and unique advantages, but the cotton market has been liberalized, the overall quality of cotton has declined, textile enterprises reflect mixed mixed grade, foreign fiber and other serious problems, the competitiveness of domestic cotton decline, which is not conducive to the high-end development of the downstream textile industry.

How to make textile enterprises give priority to the use of domestic cotton and enhance the competitiveness of China's cotton textiles and clothing is a matter of great concern to the industry.

Therefore, the cotton association of China will regulate and guide the industry to improve the quality level by registering the logo, so as to promote the sustainable development of China's cotton industry.

On the other hand, it is conducive to forming a pattern of internal demand and stabilizing external demand.

The financial crisis has changed the global market structure. China is not only a big textile producer but also a big consumer country.

In the current international economic situation, we need to stabilize exports of textiles and clothing and stimulate domestic consumption.

By promoting this logo to stimulate domestic demand and expand cotton consumption, it will not only help promote the healthy development of the textile industry, but also facilitate the development of the cotton industry and increase the income of farmers.

In addition, the promotion of China's Cotton Logo is also conducive to advocating the concept of environmental protection and promoting the change of consumption concept.

It is hoped that the quality of domestic cotton will be effectively promoted through the promotion of logo, and more high-quality raw materials will be provided for enterprises.

The company expressed its willingness to take part in the promotional activities of the logo and enhance the competitiveness of China's cotton and textile industry through joint efforts.