China - Peoples Republic of Cotton and Products Annual 2013

An Expert's View about Textiles, Apparel and Accessories in China

Posted on: 8 Apr 2013

A shift in planting area to higher profit, alternative crops drops MY13/14 domestic cotton production forecast to 7 million tons despite government incentives to provide income and stabilize cotton.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 4/2/2013 GAIN Report Number: 13017 China - Peoples Republic of Cotton and Products Annual 2013 Approved By: Michael Riedel AgBeijing Prepared By: M. Melinda Meador and Wu Xinping Report Highlights: A shift in planting area to higher profit, alternative crops drops MY13/14 domestic cotton production forecast to 7 million tons despite government incentives to provide income and stabilize cotton acreage. Government purchases of cotton, funneled into state reserves, have resulted in a record level of domestic stocks, which coupled with tariff rate quota restrictions on additional supplies, will impact China’s import demand. U.S. cotton export volume fell to second place behind India in MY11/12 and face competition for imports projected to fall to 2 million tons in MY13/14. Cotton consumption is expected to rise to 8.7 million tons as China’s domestic and emerging markets stimulate demand. 1 Includes PSD Changes: Yes Includes Trade Matrix: Yes Annual Report Beijing [CH1] [CH] 2 Executive Summary: China has no official cotton market information collection system. The lack of transparent and reliable data (production, consumption, and stocks) has been more pronounced in recent years due to the rapid expansion and diversified scales of production. The numerous players continue to diversify ownership in the industry chain, including the large number of cotton farmers, gins, merchants and mills. All these entities contribute to making the collection of reliable production statistics in China an extremely difficult task. MY13/14 production of 7 million tons is less than the 7.6 million tons in the previous year on reduced planted area. The government continues to provide income protection to cotton farmers through a minimum purchase price which exceeds the world price. In MY12/13, farmers with qualified cotton received RMB20,400/ton, up from RMB19,800/ton MY11/12. The elevated price is pulling a majority of the crop into government held reserves estimated to have reached a historic level of almost 10 million tons. China’s ability to release state reserve for domestic use and control additional cotton supplies through the tariff rate quota will impact the demand for imports. Total imports are likely to fall to 2 million tons in MY13/14. Production: China’s textile industry is the world’s largest consumer of cotton. To fill this huge demand, the industry depends on Chinese farmers to produce up to 70 percent of its supply needs. Domestic production, however, has not kept pace with the rapid growth and increasing sophistication of the textile industry. Several production challenges, including preferential government support to grain crops, volatile price signals and limited arable land, have slowed industry growth. Nevertheless, government policies continue to target a stable cotton production through financial measures which provide income support and minimize price volatility. Post predicts MY12/13 domestic production at 7.6 million tons. Gains in yield and additional planted area in Xinjiang are offset by production drops in the Yellow River region following excessive rainfall. China’s National Statistics Bureau (NSB) estimates MY12/13 production at 6.84 million tons echoing the National Development and Reform Commission (NDRC) MY12/13 production estimate of 6.9 million tons based on cross-agency analysis. As of March 24, China Fiber Inspection Bureau (CFIB), reported total classified MY12/13 crop at 7.11 million tons, of which 4.46 million tons were classified for Xinjiang. (Note: In late 2012, the Xinjiang Statistics Bureau reported MY12/13 Xinjiang cotton production of 3.45 million tons). As we’ve reported before, inconsistencies in Xinjiang’s reported planted area frequently distorts total production figures (GAIN CH10033). Post’s MY13/14 production is forecast lower at 7 million tons based on an expected drop in planted area to 5.03 MHa and average yield. The following table reflects production forecasts for MY12/13 and MY13/14 by major industry source. 3 Cotton Production Estimate/Forecast by Various Sources (million tons) CCA NCMMN CNCE NSB Post MY12/13 7.42 7.61 7.47 6.84 7.6 MY13/14 NA 6.65 6.93 NA 7.0 [Note: CCA is China Cotton Association, NCMMN is National Cotton Market Monitoring Network, CNCE is China National Cotton Exchange, NSB is National Statistics Bureau]. Planted Area MY13/14 cotton planted area is forecast to decline to 5.03 MHa, down from the estimated 5.25 MHa in the previous year, as farmers in the Yellow River region plant more acreage in alternative crops than is added to cotton in Xinjiang. In its 2013 Crop Production Work Plan released in late February, the Ministry of Agriculture (MOA) targeted MY13/14 cotton planted area at 70 million Mu (4.67MHa) with stable area in the Yellow River and the Yangtze River regions and moderate expansion in Xinjiang’s cotton area. MY13/14 planted area in Xinjiang is forecast to rise to 2.17 MHa, up from an estimated 2.15 MHa in the previous year. Xinjiang cotton planted area has expanded rapidly since MY11/12 in response to favorable market prices offered by the government which insured cotton remains a competitive crop in this region. Chart 1- China Cotton Planted Area and Production (2009-2013, in million hectares (MHa) and million tons) Chart 2 shows that cotton profit peaked in MY10/11 due to a world price surge and remained strong at RMB8,550/Ha in MY11/12 in Xinjiang due to a high purchase price paid by the government. Industry sources indicate that a majority of Xinjiang’s MY 12/13 crop (4.06 million tons from a total 4.5 million tons) was purchased by the government at RMB20,400 and reportedly added to state reserves. In the Yellow River region, however, farmers planting “wheat+corn” had a profit of RMB8,550/Ha and RMB7,770/Ha in Shandong and Henan, respectively, compared to the negative cotton profit reported in these two provinces in MY11/12. Low yield in the Yellow River region further eroded cotton profits in MY12/13, which is expected to intensify the planting decline in MY13/14. Low profits and labor shortages, as workers choose urban employment over rural, in the Yangtze River region attributed to the planting intention decline. 4 Chart 2 - Comparison of Average Net Profit from Cotton Planting (RMB/Ha) Source: NDRC In mid-January, CNCE forecast MY13/14 cotton area would fall by 5 percent, with losses in the Yellow River (-13 percent) and Yangtze River regions (-6 percent) canceling area gains in Xinjiang (+ 2 percent) and Gansu (+ 1 percent) provinces. The area decline drops CNCE’s production estimate to 6.69 million tons, down from its estimated MY12/13 production of 7.22 million tons. In February, CCA shared survey results indicating a MY13/14 cotton planting intention slide to 4.54 MHa, a 6.8 percent dip over the previous year, with Yangtze River region down 6.1 percent, Yellow River region down 17.2 percent, but the northwest region was up 0.3 percent. Based on its mid-March survey, the China Academy of Agricultural Science Cotton Research Institute (CRI) reported an 8.5 percent fall in MY13/14 cotton planting intentions to 4.67 MHa, a slump from its estimated area of 5.1 MHa in MY12/13, with the Yangtze River region down 9.1 percent, the Yellow River region down 10.5 percent, and the northwest region down 6.9 percent (north Xinjiang down 10 percent, south Xinjiang down 4.3 percent). Likewise, NCMMN’s mid-March survey results showed that MY13/14 cotton planting intentions were down 2.9 percent from the previous year to 4.84 MHa. Specifically, the Yellow River region will decline 9.3 percent to 1.48 MHa with the biggest drop of 12.4 percent and 13.3 percent in Henan and Hebei, respectively, followed by the Yangtze River region down 5.4 percent to 1.12 MHa. Planting intentions in the northwest region, though, were up by 2.3 percent to 2.21 MHa. The Xinjiang Development and Reform Commission, however, reported a 2 percent decline in cotton planting intention in MY13/14. Reportedly, the local government is planning to re-structure industry with a plan to “curb cotton expansion, maintain grain area, regulate fruits and promote animal production.” In addition, the continuing rise in the cost of agricultural inputs has also impacted cotton planting intentions. 5 Cotton Planted Area Estimate/Forecast by Major Sources Planted Area (1,000 Ha) MY12/13 MY13/14 Change% NSB 4,700 NA CCA Feb 4,880 4,540 -6.8% NCMMN Mar 4,985 4,840 -2.9% RERC/MOA Mar* NA NA -6.5% CRI Mar 5,100 4,670 -8.5% CNCE* Dec 4,610 4,812 -5.0% Post 5,250 5,030 -4.2% *Rural Economy Research Center/MOA**China National Cotton Exchange Yield Overall, MY13/14 cotton yield is forecast moderately above average at 1,392Kg/Ha. China’s average cotton yield by individual province/autonomous region varies significantly, ranging from 971Kg/Ha in Anhui to 1,747Kg/Ha in Xinjiang (see Chart 3). MY12/13 average cotton yield was 1,455 Kg/Ha (NSB total production divided by planted area), while the yield for Xinjiang hit a record at 2,056Kg/Ha (per Xinjiang Statistics Bureau) due to good weather conditions. Chart 3 - Area/Yield/Production by Province (MY07/08 to MY11/12) One factor contributing to yield improvements is Bt cotton use which is expected to continue in MY13/14. Bt varieties could potentially reach 100 percent of the crop in the Yellow River provinces of Henan, Hebei, Shandong, and Anhui Provinces. However, yield in the Yangtze River and Yellow River regions remains volatile and low due to weather uncertainties. 6 In Xinjiang’s dry climate, Bt cotton is less prevalent due to a lower risk of diseases and pests. Conventional varieties with specific traits, such as dwarf plant size and early maturity, continue to raise yields in Xinjiang. The Xinjiang Production and Construction Corp (PCC) farms, which are organized on a larger scale than other typical cotton farms, incorporate particular agronomic practices, such as high density sowing, plastic sheet covering, and drip irrigation technology, to improve yields. Stocks Government purchases of up to 6.46 million tons of cotton from the MY12/13 crop (85 percent of the total crop as of March 25) have expanded state reserves to a record level approaching 10 million tons through the first quarter. CCA reported that mills purchased 490,000 tons of cotton at state reserve auctions in September 2012 and between January 14 and March 25, 2013, bought another 910,000 tons (about 30 percent of the amount available) at a base price of RMB 19,000 per ton. The lackluster interest in purchasing cotton reflects a stagnation in cotton demand. Nevertheless, NDRC plans to offer 4.5 million tons for sale by the end of July, 2013. Given the high price for state reserve cotton and slow recovery of demand, the government will have to hold stocks in preparation for potential future mill demand. Post forecasts ending stocks will remain high at 9.2 million tons for MY12/13, and hit 9.5 million tons at the end of MY13/14. This forecast will be impacted by many factors including the consumption recovery and the price gap between the domestic and world market. The stock to use ratio remains high at above 110 percent in MY12/13 and 13/14. Cotton Trade Note: Annual import volume is controlled by the government through a tariff rate quota (TRQ) system. This policy facilitates the government ability to protect domestic production and regulate supply of cotton imports. For MY12/13, the government authorized 894,000 million tons of cotton import TRQ (subject to one percent import tariff). In late March 2013, the government allocated additional TRQ subject to a variable tariff rate in response to industry requests. Industry sources indicate that the supplemental quota was allocated in a 1 to 3 volume ratio (to receive 1 ton of TRQ, mills must purchase 3 to 4 tons of state reserve). The widely rumored additional TRQ for “processing trade” has not been distributed as of this report. The interaction between low world market price, limited import quota and tight domestic cotton supply, stimulated over quota, full duty (40 percent) cotton imports. Industry experts believe that, so long as the price gap between domestic and international markets remains around RMB5,000/ton ($800/ton), Chinese cotton buyers will continue to import cotton outside the TRQ (by paying the 40 percent duty). MY 13/14 cotton imports are forecast at 2 million tons, down from the estimated 3.1 million tons in MY12/13. Imports will depend on the balance between many factors, including the size of domestic 7 production, strength of cotton consumption, level of governmental reserves and extent of market intervention measures, and the price gap between domestic and world prices. Due to its high stocks and finite warehouse storage capacity, the government is less likely to purchase extensive amounts of the MY13/14 domestic crop. If this occurs, textile mills access to domestic supply will improve thereby reducing their reliance on imports to meet demand. Chart 4 - Cotton Production, Imports and Consumption (in 1,000 tons) Source: FAS/Beijing Estimates/Forecast Cotton imports are also affected by yarn imports. Yarn imports face no volume import restrictions. In 2012, China imported a record 1.4 million tons of yarn, up from 806,000 tons in 2011. High net yarn imports in part reduced cotton imports in 2012 and will continue to impact cotton imports in 2013. China’s cotton exports average about 10,000 tons annually, insignificant compared to total cotton use. Cotton exports in 2013 may increase slightly due to huge stocks, but significant export growth is unlikely due to its high domestic price. Yarn exports remain stable at about 300,000 tons, making net yarn imports 1.15 million tons, significantly higher than the 500,000 tons in 2011. Consumption MY13/14 cotton consumption is forecast at 8.7 million tons, up from an estimated 8 million tons in MY12/13. Although demand from developed markets, like the US and EU, remains sluggish due to recovering economic performance, consumption of apparel and textile products in China’s domestic and other developing economies is on the rise. In making those products, depending on the price difference between cotton and synthetic fibers, and on the market demands at the time of production, mills can adjust the cotton content in yarn production. Historically, the price of cotton fiber runs approximately 20 percent higher than that of synthetic fiber. When cotton prices are high for a sustained period, for example in 2011, the share of “pure cotton” in yarn reportedly declined by 5.5 percent while “synthetic yarn” rose 7.2 percent, respectively, over 2008. Of concern to the cotton industry is that even when cotton prices recovered, the substitution of synthetic for cotton fiber trend continued. According to NSB, total chemical fiber production in 2012 8 was 38 million tons, up 12.1 percent over the previous year. Industry experts anticipate that the share of synthetic fibers in yarn production may continue in 2013 due to high domestic cotton prices. China's Textile Sector Production/Investment Trends 2012/2011 Year/Item 2009 2010 2011 2012 Change % Yarn Production (MMT) 23.93 27.17 28.7 29.84 +4 Fabrics Production (Million Meters) 740 800 814 841 +3.3 Chemical Fiber Production (MMT) 27.3 30.9 33.9 38 +12.1 Fixed Asset Investment in Textile Sector (RMB billion) 176.8 257 366.9 409.5* +11.6 Source: China Economic and Social Development Report by NSB Textile Industry Faces New Challenges The textile industry in China employs over 23 million people and is considered an economic pillar industry. In China’s 12th Five Year (2011-2015) Plan, the government confirmed its support to upgrade this sector. According to NSB, fixed asset investment in the textile industry in 2012 reached $65.5 billion, up 12 percent over 2011, but significantly lower than the 30.9 percent in 2011. Despite this financial influx, the textile industry faces significant challenges, including rising production costs for key inputs such raw materials and labor. Industry statistics show that in 2012 mills paid more than RMB 4,000 to 5,000/ton ($640 to $800) above the world price for domestic cotton. Price inflation is expected to continue in 2013 as the government has not provided signals that it will reduce its minimum purchase price paid for the MY13/14 domestic crop. In addition to high prices for raw materials, Chinese industry leaders estimate that the general labor cost rose more than 10 percent in 2012 over the previous year and a general labor shortage is unlikely to provide relief from this rising expense. Electricity costs have also increased by 2 to 4 percent in 2012 from the previous year. To address these factors which jeopardize the competitiveness of Chinese mills, textile industry leaders are using different options. Some mills are improving efficiency and productivity to maintain profits. Others have moved operations towards China’s central and western regions in search of lower labor inputs and a favorable investment climate. For example, industry insiders believe Xinjiang’s yarn production, which reached 402,000 tons in 2012, will increase in the next few years once potential spinning capacity is fully operational. China's Textile Sector Production/Investment Trends Change Year/Item 2009 2010 2011 2012 % Yarn Production (MMT) 23.93 27.17 28.7 29.84 +4 Fabrics Production (Million Meters) 740 800 814 841 +3.3 9 Chemical Fiber Production (MMT) 27.3 30.9 33.9 38 +12.1 Fixed Asset Investment in Textile Sector (RMB billion) 176.8 257 366.9 409.5* +11.6 Source: China Economic and Social Development Report by NSB Other operators have relocated spinning facilities to southeast Asian countries in search of lower production costs while others have increased yarn imports, instead of cotton, to ease price operating expenses. Domestic Consumption to Increase According to the China Textile Industry Association (CTIA), the domestic market accounted for more than 83 percent of the sector’s total sales value in 2012. With GDP growth at 7.8 percent in 2012 and expected at 7.5 percent in 2013, higher disposable income and rising living standards of Chinese consumers are driving retail consumption to the benefit of cotton products. For example, as indicated in Chart 6, the 2011 per capita expenditures on clothing increased for both urban and rural residents, up 16 percent for urban and 30 percent for rural over the previous year, with urban residents far outspending their rural counterparts. The market potential for China’s 674.1 million rural residents to increase textile related purchases is expected to rise as their incomes grow as well. This will support continued demand for domestic cotton products. Chart 5 - Per Capita Expenditures on Clothing By Urban and Rural Resident (in RMB/year) Source: NSB Misreporting of Yarn Categories and Volume Continue A long standing problem in consumption forecasting is the lack of reliable data to connect cotton consumption data with finished product numbers. For example, according to NSB, total yarn production for 2011 was reported at 29 million tons, of which 22 million tons (accounting for 75.4 percent) was reported as pure cotton yarn, with the remainder as blended yarn and synthetic yarn. These figures are problematic when compared to China’s average cotton consumption, averaging 10 million 10 tons annually in recent years, and other fibers available for spinning, which cumulatively cannot produce the reported volume of yarn. Over-reporting of total yarn and pure cotton yarn production and under-reporting of synthetic fiber ratios and cotton consumption, or some combination thereof, distorts accurate analysis. China’s industry insiders acknowledge misreporting of yarn categories and volume by mills is the basis of the problem. Trade Textile and apparel exports expected moderate growth in 2013 According to NSB, China’s textile and apparel export growth peaked at $254.9 billion in 2012, up slightly from the $247.9 billion in the previous year. This export gain pales, though, when compared to the 20 percent leap in 2011 (over 2010) and reflects continuing weakness in overseas market demand. Industry sources, though, expect exports to strengthen in 2013 on anticipation of a moderate recovery in the global economy. In fact, exports improved in the first two months of 2013 with total exports valued at $41.2 billion, up 32 percent over the $31.2 billion in the same period of 2012. Any gains from a significant export rebound, however, will be hard won given a declining competitiveness of the sector as a result of high production costs. Chart 6 - Textile and Apparel Exports (Value in $100 million) Source: NSB U.S. Competes with India for China’s Market In MY11/12, India topped the United States as China’s largest cotton supplier with total export volume of 1.98 million tons, compared to 1.31 million tons, respectively. While the quality and reliability of U.S. cotton appeals to China’s end-users, India’s price and transportation advantages provide serious competition. India’s cotton production is expected to increase as it incorporates new technology, expands Bt cotton dissemination and actively promotes its product. Competition from India and other suppliers, coupled with expected low demand for imports, is expected to reduce US cotton imports to China in MY13/14. Consignment Trade Due to strong demand for alternatives to high-priced domestic cotton since late 2011, consignment trade has been gaining ground. China’s small to medium-sized mills choose consignment purchases due to the flexibility they offer, including short delivery time, convenient quality verification and lower financial commitment. However, due to the lack of import TRQ, most mills pay the full duty to take delivery of 11 the cotton held in bonded warehouses. Consignment trade is expected to remain a viable source until the world cotton price changes making the cost of import plus full duty unattractive for Chinese mills. Policy Purchase floor price policy continues The State Purchase of Domestic Cotton Program, which establishes the floor price for purchase of domestic cotton for state reserves and the cotton TRQ regime, are government programs enacted to maintain “the domestic cotton supply/demand balance.” When the domestic cotton price is above production costs, for example, during the MY 09/10 and 10/11, the program is suspended. When the price falls below, for example as in MY 11/12, the program is revived. A minimum floor price for qualified cotton is established and extended to an unlimited volume of cotton marketed between September and March. In MY11/12, the government set a floor price of rmb19,800/ton for grade 328 cotton. In MY12/13, it set an even higher price of RMB20,400/ton. Reportedly, the government purchased 85 percent of the MY12/13 crop and added 6.46 million tons of cotton to state reserves. The MY 13/14 floor price has not been announced but speculation is that it is likely to remain at RMB20,400/ton. Seed Subsidy Large seed producers/traders currently compete for the $34/Ha subsidy provided for selected “high quality variety” seeds to improve quality cotton coverage. Total expenditure in 2012, though unpublished, is believed to exceed $180 million (if based on the NSB’s 5.04 MHa planted area for MY12/13). Registration System for Overseas Cotton Suppliers Overseas cotton suppliers must be registered with China’s General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ) to export cotton to China (CH8075 and CH9004). On January 18, 2013, AQSIQ published Decree No.151 on "Supervision and Administration Measures for Inspection of Import Cotton." The measures took effect on February 1, 2013. A draft version was published for comment on December 8, 2011 (CH11064), and notified to the World Trade Organization (WTO) on July 23, 2012 as G/TBT/N/CHN/925. Preliminary comparison between the draft and final versions shows only slight modifications in Article 26 (CH13003). The impact of the Measures on cotton trade is expected to be limited. Traders are also recommended to register with AQSIQ to export cotton to China based on these requirements. USDA continues to work with AQSIQ on industry concerns related to the registration system and to enhance mutual understanding and provide a solid foundation for both sides to carry out additional cooperation for cotton import inspections. MY13/14 official classified cotton hit record of 7.1 million tons China’s cotton classification reform moved forward in MY12/13. According to CFIB, as of March 24, 2013, total cotton baled and classed on the new classification system reached 7.11 million tons, accounting for 93.5 percent of the total production (estimated at 7.6 million tons) in MY12/13. The increase in officially classified volume (from the 5.56 million tons in MY11/12) is mainly driven by the 12 state reserve purchase requirement that cotton be classified. More than 1,801 gins participated in cotton HVI classification, up from the 1,738 in the previous year. The new classing system is expected to help facilitate domestic cotton production estimates and upgrade the quality levels of China’s ginning sector. CFIB MY12/13 classing data (as of March 24) shows 4.46 million tons of Xinjiang cotton was classified, already much higher than the NSB released MY12/13 Xinjiang production of 3.45 million tons, indicating continuing underestimation of Xinjiang cotton production. Targeted Loans In MY12/13, the Agriculture Development Bank of China (ADBC) continued to provide targeted loans with favorable terms for the purchase of seed cotton. This program facilitated the marketing of seed cotton when market prices remained weak and demand for cotton was stagnant. Xinjiang government information indicated that total loans exceeded RMB60 billion in My12/13, up 17.6 percent over the previous year. ADBC will continue to provide financial assistance for domestic cotton marketing in MY13/14. Marketing Transporting Cotton from Xinjiang Province The government continues to provide a transportation subsidy of RMB500/ton ($80) in MY12/13 (up from the RMB 400/ton in MY11/12) for Xinjiang origin cotton shipped to mills in coastal and southern cities. Xinjiang province provides 40 percent of China’s domestic cotton production yet there is only one rail line to move the raw product cross-country to the textile production areas. Harvest time can be a bottleneck. The shipping congestion improved slightly in MY12/13 when the government purchased most of the Xinjiang cotton for reserve and stored it locally, thus reducing the pressure on rail transportation. U.S. cotton exporters interested in exporting cotton to China in need of marketing assistance may contact USDA/FAS’s Agricultural Trade Offices (ATO) in Beijing, Chengdu, Guangzhou, Shanghai and Shenyang. They can be contacted via email at, ATOBeijing@usda.gov, ATOChengdu@usda.gov, ATOGuangzhou@usda.gov, ATOShanghai@usda.gov, and ATOShenyang@USDA.gov, respectively. Cotton Council International (CCI) is also actively involved in promoting U.S. cotton in China and throughout Asia. CCI serves China regionally from its Hong Kong Office. CCI can be reached via email at cci-hongkong@cotton.org. Both CCI and the ATO’s organize events designed to bring U.S. cotton exporters in close contact with Chinese buyers. The China International Cotton Conference, a biannual event sponsored by CCA, MOA, and FAO, attracts a worldwide audience from the cotton/textile industry. The 2012 conference was held in Chengdu, Sichuan Province. CCA, in collaboration with China National Cotton Exchange also holds an annual event, the China Cotton Industry Development Forum, which focuses on analysis and outlook of the market situation. The 2013 Forum will be held in June in Qingdao. Tables 13 Production, Supply and Demand (PSD) Table 1. PSD (in 1,000 Bales and 1,000 Ha) 2011/2012 2012/1013 2013/1014 Market Year Market Year Market Year Begin: Aug Begin: Aug Begin: Aug 2011 2012 2013 USD USD USD A A A Cotton China Offici New Offici New Offici New al Post al Post al Post Area Planted 0 5,380 0 5,275 5,030 Area Harvested 5,400 5,380 5,275 5,275 5,030 10,60 10,60 30,18 30,18 42,46 Beginning Stocks 3 3 1 1 6 33,10 33,10 35,00 34,91 32,15 Production 0 0 0 0 0 24,53 24,53 15,00 14,25 9,190 Imports 3 3 0 0 MY Imports from U.S. 0 6,015 0 3,700 3,676 68,23 68,23 80,18 79,34 0 83,80 Total Supply 6 6 1 1 6 Exports 55 55 75 75 75 38,00 38,00 36,00 36,80 39,96 Use 0 0 0 0 0 Loss 0 0 0 0 0 38,00 38,00 36,00 36,80 0 39,96 Total Dom. Cons. 0 0 0 0 0 30,18 30,18 44,10 42,46 0 43,77 Ending Stocks 1 1 6 6 1 68,23 68,23 80,18 79,34 0 83,80 Total Distribution 6 6 1 1 6 Stock to Use % 79 79 122 115 112 1,335. 1,335 1,445. 1,441 1,392 Yield . . . TS=TD 0 0 0 14 Table 2. PSD (in 1,000 Tons and 1,000 Ha) 2011/2012 2012/1013 2013/1014 Market Year Market Year Market Year Begin: Aug Begin: Aug Begin: Aug 2011 2012 2013 USDA USDA USDA Cotton China Offici New Offici New Offici New al Post al Post al Post 0 5,38 0 5,27 5,03 Area Planted 0 5 0 5,400 5,38 5,275 5,27 5,03 Area Harvested 0 5 0 Beginning Stocks 2309 2309 6571 6571 0 9246 Production 7207 7207 7620 7601 0 7000 Imports 5341 5341 3266 3100 0 2000 MY Imports from U.S. 0 1310 0 806 0 800 1485 1727 1824 Total Supply 14857 7 17457 4 0 6 Exports 12 12 16 16 0 16 Use 8273 8273 7838 8012 0 8700 Loss 0 0 0 0 0 0 Total Dom. Cons. 8273 8273 7838 8012 0 8700 Ending Stocks 6571 6571 9603 9246 0 9530 1485 1727 1824 Total Distribution 14857 7 17457 4 0 6 Stock to Use % 79 79 122 115 112 1,335. 1,33 1,445. 1,44 1,39 Yield 5. 1. 2. TS=TD 0 0 0 15 Trade Tables Table 3. China’s Monthly Cotton Imports Unit: Tons Month 2008 2009 2010 2011 2012 2013 January 157,712 77,993 301,359 391,590 326,468 457,490 February 158,168 93,083 221,046 184,216 616,048 March 213,221 98,763 323,807 276,459 625,196 April 263,417 145,560 323,819 210,453 509,694 May 240,159 151,524 197,955 144,569 501,855 June 211,043 168,619 177,248 120,017 475,971 July 212,580 131,440 168,882 157,087 405,842 August 186,875 109,711 240,172 207,048 305,556 September 129,057 102,162 200,806 252,739 262,924 October 96,155 118,604 96,136 252,315 272,067 November 76,141 112,866 126,203 378,152 303,643 December 168,433 216,776 461,657 790,402 532,187 TOTAL 2,112,961 1,527,101 2,841,100 3,367,058 5,137,451 Marketing Aug/08- Aug/09- Aug/10- Aug/11- Year Jul/09 Jul/10 Jul/11 Jul/12 TOTAL 1,523,643 2,374,346 2,609,365 5,341,730 Unit: 480-lb Bales Month 2008 2009 2010 2011 2012 2013 January 724,373 358,222 1,384,142 1,798,573 1,499,468 2,101,252 February 726,468 427,529 1,015,264 846,104 2,829,508 March 979,323 453,619 1,487,246 1,269,776 2,871,525 April 1,209,874 668,557 1,487,301 966,611 2,341,025 May 1,103,049 695,952 909,207 664,005 2,305,020 June 969,321 774,466 814,100 551,238 2,186,135 July 976,378 603,702 775,675 721,501 1,864,032 August 858,318 503,901 1,103,110 950,971 1,403,419 September 592,759 469,232 922,302 1,160,830 1,207,610 October 441,641 544,749 441,553 1,158,883 1,249,604 November 349,715 518,392 579,650 1,736,852 1,394,632 December 773,613 995,653 2,120,391 3,630,316 2,444,335 TOTAL 9,704,831 7,013,974 13,041,950 15,464,897 23,596,312 Marketing Aug/08- Aug/09- Aug/10- Aug/11- Year Jul/09 Jul/10 Jul/11 Jul/12 TOTAL 6,998,092 10,905,371 11,984,813 Source: Global Trade Atlas 16 Table 4. China’s Quarterly Cotton Imports by Country of Origin Unit: Metric Tons Marketing Year: 2010/2011 Country Jul-Sep /10 Oct-Dec /10 Jan-Mar/11 Apr-Jun/11 TOTAL United States 293,588 189,588 415,927 318,546 1,217,649 India 42,126 255,970 322,615 10,312 631,023 Uzbekistan 30,832 102,814 54,138 22,737 210,521 Australia 143,968 9,135 52 39,984 193,139 Brazil 16,280 54,433 6,637 0 77,350 Burkina Faso 28,562 3,694 2,456 16,539 51,251 Cameroon 10,047 5,749 2,187 15,765 33,748 Benin 9,636 0 3,649 19,033 32,318 Egypt 6,313 4,742 10,414 5,564 27,033 Mexico 233 15,071 13,464 614 29,382 Pakistan 191 19,401 5,546 2,550 27,688 Mali 8,615 3,232 1,487 9,676 23,010 Other 19,468 20,167 13,694 13,719 67,048 TOTAL 609,859 683,996 852,266 475,039 2,621,160 Marketing Year: 2011/2012 Country Jul-Sep /11 Oct-Dec /11 Jan-Mar/12 Apr-Jun/12 TOTAL India 78,544 602,910 778,250 421,102 1,880,806 United States 98,835 147,563 424,256 584,886 1,255,540 Australia 280,665 208,774 30,258 108,580 628,277 Brazil 17,674 191,260 87,778 46,986 343,698 Uzbekistan 43,257 47,600 111,853 60,442 263,152 Burkina Faso 26,098 22,893 10,397 46,895 106,283 Mali 20,855 10,122 4,774 28,746 64,497 Cameroon 11,153 6,665 5,459 29,973 53,250 Pakistan 7,154 23,471 15,901 24,482 71,008 Other 32,639 159,611 98,785 135,428 426,463 TOTAL 616,874 1,420,869 1,567,711 1,487,520 5,092,974 Marketing Year: 2012/2013 Country Jul-Sep /12 Oct-Dec /12 Jan-Mar/13 Apr-Jun/13 TOTAL Australia 352,003 327,752 679,755 United States 255,847 198,658 454,505 Brazil 43,500 188,815 232,315 India 91,159 148,171 239,330 Uzbekistan 57,670 79,788 137,458 Mali 48,838 25,042 73,880 Zambia 5,820 21,548 27,368 Mexico 5,774 15,875 21,649 Other 113,711 102,249 215,960 TOTAL 974,322 1,107,898 2,082,220 Source: Global Trade Atlas 17 Table 5. China’s Monthly Cotton Exports Unit: Tons Month 2009 2010 2011 2012 2013 January 581 86 3,641 0 70 February 606 0 5,108 472 March 2,969 578 1,908 617 April 193 1,136 5,240 42 May 887 1,474 6,124 1,512 June 348 461 1,058 5,919 July 1,401 86 820 1,653 August 830 1,052 1,097 1,389 September 114 1,240 456 3,007 October 97 255 0 1,168 November 8 55 90 502 December 215 31 157 1,277 TOTAL 8,249 8,464 27,710 17,558 Marketing Year Aug/09-Jul/10 Aug/10-Jul/11 Aug/11-Jul/12 Aug/12/Jul/13 TOTAL 5,084 26,532 11,600 Unit: 480-lb Bales Month 2009 2010 2011 2012 2013 January 2,670 395 16,723 0 322 February 2,785 0 23,461 2,168 March 13,635 2,655 8,763 2,834 April 888 5,218 24,067 193 May 4,073 6,770 28,128 6,945 June 1,597 2,117 4,859 27,186 July 6,437 395 3,766 7,592 August 3,812 4,832 5,039 6,380 September 522 5,695 2,094 13,811 October 446 1,171 0 5,365 November 35 253 413 2,306 December 988 142 721 5,865 TOTAL 37,887 38,875 127,272 80,644 Marketing Year Aug/09-Jul/10 Aug/10-Jul/11 Aug/11-Jul/12 TOTAL 23,353 121,861 Source: Global Trade Atlas Table 6. China’s Monthly Cotton Yarn and Thread Imports Unit: Tons 18 Month 2009 2010 2011 2012 2013 January 38,702 102,478 90,812 65,637 162,971 February 61,569 58,667 50,986 114,922 March 78,186 103,588 78,041 113,610 April 81,291 93,393 53,412 99,090 May 78,993 85,614 43,123 114,747 June 84,389 74,473 40,781 97,851 July 88,031 75,036 54,851 126,778 August 81,865 80,202 63,562 143,086 September 88,651 82,571 75,369 129,565 October 77,214 75,846 83,269 116,731 November 90,793 94,145 79,225 134,442 December 105,186 102,953 90,537 149,506 TOTAL 954,871 1,030,976 805,979 1,405,965 Marketing Year Aug/09-Jul/10 Aug/10-Jul/11 Aug/11-Jul/12 Aug/12-Jul/13 TOTAL 1,036,959 847,723 1,124,597 Source: Global Trade Atlas Table 7. China’s Monthly Cotton Yarn and Thread Exports Unit: Tons Month 2009 2010 2011 2012 2013 January 25,208 39,795 30,243 19,420 44,249 February 26,468 24,800 20,323 24,823 Mar ch 39,808 48,377 48,893 41,244 Apr il 45,606 44,305 35,205 28,122 Ma y 42,557 49,254 23,469 27,809 June 47,772 48,430 21,395 24,670 July 43,592 39,325 18,717 19,824 Aug ust 37,850 29,464 18,998 23,196 September 41,776 24,584 18,095 29,497 Oc tober 36,413 28,400 19,404 31,207 November 44,509 35,875 17,802 31,866 De cember 45,598 28,083 22,684 41,230 TOTAL 477,157 442,702 297,239 342,908 M arketing Year Aug/09-Jul/10 Aug/10-Jul/11 Aug/11-Jul/12 Aug/12-Jul/13 Aug/13-Jul/14 TOTAL 500,431 344,651 355,118 Source: Global Trade Atlas Table 8. China’s Monthly Cotton Fabric Imports Unit: 1,000 Square Meters 19 Month 2009 2010 2011 2012 2013 January 45,848 47,637 47,059 34,758 53,556 February 55,264 34,968 35,221 56,633 March 68,193 61,634 60,125 65,647 April 75,033 67,449 56,649 64,198 May 66,003 61,830 47,997 68,781 June 63,213 56,340 45,392 55,770 July 65,614 63,384 48,742 55,550 August 61,830 63,203 55,200 59,969 September 70,214 68,941 56,258 60,501 October 69,609 61,072 54,614 59,837 November 69,042 65,074 60,027 56,748 December 85,019 65,676 53,163 62,782 TOTAL 794,882 719,218 622,458 701,175 Marketing Aug/09- Aug/10- Aug/11- Aug/12- Aug/13- Year Jul/10 Jul/11 Jul/12 Jul/13 Jul/14 TOTAL 748,957 665,152 680,599 Source: Global Trade Atlas Table 9. China’s Monthly Cotton Fabric Exports Unit: 1,000 Square Meters Month 2008 2009 2010 2011 2012 2013 January 507,658 405,793 548,804 607,713 521,312 690,568 February 370,832 232,178 407,887 273,943 308,968 March 489,945 472,667 464,281 563,878 678,599 April 533,580 468,673 593,772 584,655 572,498 May 472,541 438,233 586,272 535,058 669,145 June 487,795 437,932 599,377 468,256 600,809 July 486,933 455,192 600,973 566,527 491,049 August 514,674 468,003 566,068 520,819 481,100 September 523,854 563,082 627,066 543,470 595,636 October 506,479 510,625 598,422 544,839 556,532 November 447,964 578,917 656,363 613,750 593,591 December 419,117 669,986 594,502 619,982 626,241 TOTAL 5,761,372 5,701,281 6,845,796 6,444,901 6,697,490 Marketing Aug/08- Aug/09- Aug/10- Aug/11- Aug/12- Aug/13- Year Jul/09 Jul/10 Jul/11 Jul/12 Jul/13 Jul/14 TOTAL 5,322,756 6,591,978 6,642,450 6,444,901 Source: Global Trade Atlas Other Tables 20 Table 10. Cotton Planted Area and Production by Province Planted Area (in 1,000 Ha) Year MY10/11 MY11/12 MY12/13 MY13/14 Xinjiang 1,710 1,980 2,160 2,175 Shandong 747 766 740 610 Hebei 600 633 550 500 Hubei 500 489 473 450 Henan 363 390 250 250 Anhui 364 340 305 290 Jiangsu 233 220 171 150 Hunan 227 192 202 200 Gansu 70 48 71 75 Other 324 322 353 330 Total 5,138 5,380 5,275 5,030 Production (in 1,000 tons) Year MY10/11 MY11/12 MY12/13 MY13/14 Xinjiang 2,790 3,500 4,430 3,970 Shandong 724 785 698 698 Hebei 600 653 571 518 Hubei 500 523 571 461 Henan 410 382 269 259 Anhui 300 378 270 281 Jiangsu 320 247 210 158 Hunan 290 227 251 275 Gansu 80 78 107 100 Other 390 429 223 279 Total 6,404 7,202 7,600 7,000 Average Yield (Kg/Ha) 1,246 1,339 1,441 1,392 Note: MY12/13 FAS/Beijing estimate; MY13/14 FAS/Beijing forecast 21 Table 11. Cotton Tariffs as of January 1, 2013 (continued) Description HS Code M.F.N.(%) Gen(%) VAT ED Unit Cotton, not carded or combed 5201-0000 125 13 Kg Cotton, not carded or combed, including 5201- 1 125 degreased cotton -in quota 0000.01 13 13 Cotton, not carded or combed, including 5201- 0 0 degreased cotton - tariff and out of 0000.80 quota, interim 13 13 Cotton, not carded or combed, including 5201- 40 125 degreased cotton -out of quota 0000.90 13 13 Cotton waste, yarn waste 5202-1000 10 30 17 13 Kg Cotton waste, garnetted stock 5202-9100 10 30 17 13 Kg Cotton waste, other 5202-9900 10 30 17 13 Kg Cotton, carded or combed 5203-0000 125 17 13 Kg Cotton, carded or combed, in quota 5203- 1 125 0000.01 17 13 Cotton, carded or combed, out of quota 5203- 40 125 0000.90 17 13 Cotton sewing thread, containing 5204-1100 5 40 17 16 Kg 85% or more by weight of cotton Other 5204-1900 5 40 17 16 Kg Put up for retail sale 5204-2000 5 50 17 16 Kg Cotton yarn (other than sewing 5205-1100 5 40 17 16 Kg thread), containing 85% or more to by weight of cotton, not for retail sale 5205-4800 Cotton yarn (other than sewing thread) 5206-1100 5 40 containing less than 85% by weight of to 5206- cotton, not put for retail sale 4500 17 16 Kg Cotton yarn (other than sewing 5207-1000 6 50 17 16 Kg thread), containing 85% or more 5207-9000 6 50 17 16 Kg Note: VAT--Value Added Tax; ED--Export Drawback Rate; Source: PRC Customs Import & Export Tariff, 2013 22 Table 11. Cotton Tariffs as of January 1, 2013 (continued) Description HS Code M.F.N.(%) Gen(%) VAT ED Unit Woven fabrics of cotton, 5208- 10 70 containing 85% or more by weight of 1100 cotton, weighing not more than 200 to g/square meter 5208- 5990* 17 16 M/Kg *Except: 12 70 5208- 2300 17 16 M/Kg Woven fabrics of cotton, containing 85% 5209- 10 70 or more by 1100 17 16 M/Kg weight of cotton, weighing more 5209- 10 70 than 200 g/square meter 1200 17 16 M/Kg 5209- 10 70 " 1900 17 16 M/Kg 5209- 12 70 2100 17 16 M/Kg 5209- 12 70 2200 17 16 M/Kg 5209- 12 70 " 2900 17 16 M/Kg 5209- 10 70 3100 17 16 M/Kg 5209- 10 70 3200 17 16 M/Kg 5209- 10 70 3900 17 16 M/Kg 5209- 10 70 4100 17 16 M/Kg 5209- 10 70 4200 17 16 M/Kg 5209- 10 70 4300 17 16 M/Kg 5209- 10 70 4900 17 16 M/Kg 5209- 10 70 5100 17 16 M/Kg 5209- 10 70 5200 17 16 M/Kg 5209- 10 70 5900 17 16 M/Kg Note: VAT--Value Added Tax; ED--Export Drawback Rate; 23 Source: PRC Customs Import & Export Tariff, 2013 24 Table 12. Tariff Rate Quota Description HS Code Initial Quota and Final Quota and Implementation of Final Tariff Rate Tariff Rate Quota Cotton 780,750 MT 894,000 MT 2004 5201 - 1% 1% 0000 5203 - 1% 1% 0000 Other terms and conditions: 1) STE share = 33% (See Note) 2) Staging of TRQ for cotton: Year TRQ quantity: 2002 - 818,500 MT 2003 - 856,250 MT 2004 - 894,000 MT 2005 - 894,000 MT (China added 1.4 MMT TRQ in 2005) 2006 - 894,000 MT (China added 2.7 MMT TRQ in 2006, subject to variable import duty) 2007 - 894,000 MT (China added 2.6 MMT TRQ in 2007, subject to variable import duty) 2008 - 894,000 MT (China added 2.6 MMT TRQ in 2008, subject to variable import duty) 2009 - 894,000 MT (China added 400,000 MT TRQ only for processing trade, due to weak demands for cotton) 2010 - 894,000 MT (China added 2.67 MMT TRQ subject to variable import duty) 2011 - 894,000 MT (China added 2.7 MMT of TRQ subject to variable import duty) 2012 - 894,000 tons (China added 1.32 million tons of TRQ subject to variable import duty) 2013 - 894,000 tons (as of this report, no additional TRQ has been allocated; China’s WTO commitment does NOT mandate a TRQ for CY05 and after, but China maintained an identical quantity of TRQ as CY04. In addition to those volumes, based on market demand, China adds TRQs yearly. The added TRQs are subject to a variable import duty) 25
Posted: 08 April 2013

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