The Chinese Government Is Considering Reducing The Price Distortions Caused By Reserve Cotton.

< p > the Chinese government has bought cotton from farmers in order to protect the rural economy at a price higher than the market price. However, the rise in raw material prices has seriously affected the interests of manufacturers of cotton < a target= "_blank" href= "http://www.91se91.com/" > textile < /a >, and weakened their competitiveness in competition with other countries' exporters, resulting in heavy losses to the textile factories for purchasing cotton shirts and trousers.

Liu Xiaonan, an official of the China Development and Reform Commission, said the Chinese government is considering reducing the price distortions caused by reserve cotton.

< /p >

< p > China is the largest importer of cotton in the world. In order to protect the rural economy, Beijing has bought about 10 million tons of cotton from farmers in accordance with the purchase and storage plan, which is 40% above the global benchmark price.

Insiders said that China is considering changing its active cotton reserve program. China's cotton reserve program has been driving up global cotton prices, resulting in heavy losses to the textile factories that buy cotton shirts and trousers.

< /p >

< p > however, the government and the National Cotton Association have acknowledged that China's policy is a heavy blow to China's domestic textile enterprises. The domestic cotton prices are expensive, increasing the cost of factories, weakening their competitiveness in competition with other countries' exporters, causing some factories to reduce production or close down.

Gao Fang, vice president of China Cotton Association, said at an industry conference: "this is not our intention. When we formulated policies, we did not intend to affect textile mills to such a large extent.

We did not expect this policy to be implemented for such a long time.

< /p >

< p > for the global cotton market, China's planning prospects are a key factor, because China's cotton reserves account for about 60% of global cotton stocks.

Liu Xiaonan, an official of the China Development and Reform Commission, said the Chinese government is considering reducing the price distortions caused by reserve cotton.

"Cotton policy has weakened the role of the market. We have seen this problem.

There is room for improvement in the current cotton policy, "the State Council is considering.

< /p >

< p > however, the government has previously indicated that it will continue to implement the reserve policy of the 2013/14 market in the year to purchase domestic cotton at 20400 yuan / ton (US $3300).

In contrast, the US ICE futures price is 84.73 cents per pound, equivalent to 1867 US dollars / ton.

Li Mingge, general manager of Henan Hupang group (a medium-sized textile mill), said: "the price of cotton per ton differs from that of foreign cotton by 3000-4000 yuan / ton.

We can get import quotas, buy 3 tons of domestic cotton, and get 1 tons of import quotas, but this is not much help.

Textile mills suffer huge price pressures. "

< /p >

Cotton reserves rose in the first two years, less than P, and rose to the highest price of 2.20 US dollars / pound in March 2011.

The price surge has reduced the profits of textile factories and manufacturers of "a" target= "_blank" href= "http://www.91se91.com/" > clothing > /a.

An American broker said, "obviously, they don't have a good exit strategy, which will make everyone nervous."

National procurement has increased the price of the US exchange, and the exchange price is usually the benchmark of Global trade, but the price of the exchange is too high to match the fundamentals.

Hoarding cotton also led to tight market supply, though the market faced the most surplus cotton in 2012/13.

< /p >

< p > industry insiders say that the government may directly subsidize farmers instead of subsidized cotton producers.

According to the cotton association, China has sold 2 million 500 thousand tons of cotton so far this year.

The government said it plans to sell 4 million 500 thousand tons of cotton by the end of July.

Although traders are worried that the import of national stock into the circulation may restrict imports, the association said that the total number of cotton imports paid for full taxes was almost 7 times that of last year, reaching 757000 tons in April.

Despite the purchase and storage of the country, the demand for textile mills has declined. This year, China's cotton production is 6 million 500 thousand tons, a decrease of about 5% over last year, because farmers have reduced their cotton planting area.

The association thinks consumption is about 8 million 500 thousand tons.

< /p >