The Value-Added Tax Rate Dropped To 13%. The Price Of Imported Cotton Declined Little.

From April 1st, the value-added tax reduction policy will be formally implemented. The value-added tax rate of manufacturing industry will be reduced from 16% to 13%, and the value-added tax rate of pportation and construction industry will be reduced from 10% to 9%.

Such a big burden reduction, whether for enterprises or consumers, is a great advantage.

Most textile enterprises and cotton trade in China generally say that there is no doubt that the cost of imported cotton will be further reduced since April 1st. On the one hand, the difference between domestic and foreign cotton prices is expected to continue to expand, which is conducive to signing a large number of cotton purchase contracts by cotton enterprises in China. On the other hand, some cotton contracts delivered in March will be postponed to April 1st, leading to the "blowout" of import data in April (including other agricultural products, bulk commodities, etc.), which will easily lead to misjudgement of the consumer market and the economic situation.

Recently, several foreign and import enterprises have reflected the impact of the coming down of VAT. Some Chinese buyers have pushed for 20-30 days after the delivery date. For the contracted purchase contract, they hope to renegotiate the unit price, and get a share of the benefit from the value-added tax reduction.

Does the value added tax mean that the cost of imported cotton will drop?

The author believes that there is not much room for coordination between buyers and sellers. Textile mills and importers should not hold too high expectations. The reasons are as follows:

First, ICE cotton futures "easy to rise or fall", the price of domestic and foreign cotton quotes continued strong.

As the US reserves postponed interest rates and withdrew from the table, the US dollar's strength was curbed. On the other hand, Sino US consultations were close to reaching an agreement (the Chinese side will sign a large number of contracts for importing US cotton), cotton production and quality of India and Pakistan continued to "do not give strength" and Australia predicted that the cotton planting area and output would slide in 2019, and the supply pressure of high quality cotton in the world increased. The main ICE breaking 78 cents / pound, 80 cents / pound was a big probability event.

Second, the price of imported cotton and imported cotton is not low, and the cost is not low.

Since January 2019, the main contract of ICE has been continuously consolidated in the 72-75 kg / lb narrow body, and there is no big fluctuation. Most of our textile enterprises and middlemen are importing in this area, and the margins of traders are very thin and even "hang upside down".

For example, at present, the S-6 1-5/32 traders in Qingdao market offer a price of 15300-15400 yuan / ton, while the average trade price is 14300-14400 yuan / ton under the general trade, the difference between the two is only 1000 yuan / ton, but the 1% quota rental and pfer price is as high as 1500 yuan / ton, and the situation of the quota free trader is more embarrassing.

Third, the price of domestic cotton and Xinjiang cotton have shifted upward, and the price gap between domestic and overseas has been expanding. How can the price of cotton quotas be reduced?

From the survey point of view, since the Spring Festival, the "double 28/ double 29" Xinjiang cotton trading price has risen 300-400 yuan / ton, and 3128/3129 real estate cotton has also risen 400-500 yuan / ton. At present, the mainland market "double 28" Xinjiang machine picked cotton is higher than SM 1-1/8 Brazil cotton 500 yuan / ton, only below SM 1-5/32, SM 1-3/16 1-3/16 cotton price 200 yuan / ton, in the case of the cotton price and the domestic cotton price effect of the customs clearance is outstanding, unless the Zhengzheng and domestic cotton spot take the lead in a larger pullback, otherwise, the price of the cotton basket will still rise easily.