Cotton and Products Annual

An Expert's View about Cotton in China

Posted on: 13 May 2012

MY12/13 domestic cotton production is forecast to drop to 6.85 million metric ton (MMT) on lower forecast planted area of 5.05 million hectares (MHa).

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: 5/3/2012 GAIN Report Number: CH12031 China - Peoples Republic of Cotton and Products Annual Approved By: Scandurra Laura G Prepared By: M. Melinda Meador and Wu Xinping Report Highlights: MY12/13 domestic cotton production is forecast to drop to 6.85 million metric ton (MMT) on lower forecast planted area of 5.05 million hectares (MHa), while cotton consumption is expected to increase to 10 MMT. High domestic stock levels could weaken import demand in MY12/13, depending on the level of China’s market intervention measures. The U.S. remains China’s largest cotton supplier with MY10/11 sales of 1.2 MMT. Executive Summary: Weak profit signals are luring cotton farmers to alternative crops, thus placing minimum production targets to meet growing consumption demands in jeopardy. To entice farmers to plant cotton, the government buys domestic cotton at an inflated price, in MY11/12 rmb19,800/MT, and holds it in reserve, currently estimated at 4MMT, for later use on behalf of the textile industry. Depending on China’s agenda for market intervention through release of reserve cotton and control of TRQ’s, imports could be negatively impacted in MY12/13. Note: 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 scale 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. Production Recently, the National Development and Reform Commission (NDRC) issued a notice regarding indigenous development where cotton was characterized as a crop of economic significance with a targeted minimum production. China’s textile industry is the world’s largest consumer of cotton and depends on Chinese farmers to produce up to 70 percent of its demand. Domestic production, however, has not kept pace with the rapid growth and increasing sophistication of the textile industry. Economic factors, including preferential government support to grain crops, volatile price signals and low technological adaptation, have slowed industry advancement. Nevertheless, governmental policies are targeted at maintaining cotton production through measures that provide income support, encourage production stability and minimize price volatility. Post forecasts MY11/12 domestic production at 7.2 MMT, reflecting yield losses from pre-harvest weather issues in the Yangtze River and the Yellow River regions and Xinjiang cotton production in excess of 3.5MMT. [Note: In late 2011, the Xinjiang Statistics Bureau reported MY11/12 Xinjiang cotton production of 2.9 MMT. China Fiber Inspection Bureau (CFIB), as of the end of March, reported total classified MY11/12 Xinjiang cotton at 3.32 MMT. As we’ve reported before, inconsistencies in Xinjiang’s reported planted area frequently distorts total production figures (GAIN CH10033).] China’s National Statistics Bureau (NSB) puts MY11/12 production at 6.6 MMT. MY11/12 Due to a 21 percent rise in production costs, including labor, and a 30 percent drop in world seed cotton prices in MY 11/12, profits fell by 58.5 percent to $1,134/Ha (chart 1), except for Xinjiang where cotton profits fared better. Comparison of Cotton Production Output Value and Profit in MY10/11 and MY11/12 Item Output Value Total Cost Physical Cost Profit RMB/Mu Change RMB/Mu Change RMB/Mu Change RMB/Mu Change MY11/12 1995.5 -18% 1503.6 +21% 584.7 +5.4% 491.5 -58.8% MY10/11 2433.2 +46.7% 1242.6 +17.5% 554.5 +13.5% 1190.6 +97.9% Source: CRI; Note: Exchange rate: 2010-$1=RMB6.7; 2011-$ 1=RMB6.5; 1 Ha = 15 Mu To boost farmer’s income, the Government purchased large amounts of the MY11/12 crop for state reserves at a set floor price of RMB19,800/MT, a price well above world market price. Despite this financial influx, however, cotton farmers will be considering the higher $1,410/Ha profit from the production of “wheat plus corn” last year (in Dongping, Shandong, for example), plus subsidies of $34/Ha for cotton, compared to an estimated $230/Ha for wheat, in making this year’s planting decisions. MY12/13 In light of last year’s depressed profits and more lucrative alternative cash crops, MY12/13 cotton production is expected to fall 4.9% to 6.85MMT, due to a reduction in planted acreage with average yield of 1,356kg/ha. (See Chart 2). (See Table 10 for planted area and production by province). Planted Area Despite the government’s early confirmation of an increase in the floor price to RMB20,400/MT to encourage a minimum production of 7MMT, Post forecasts MY12/13 planted area will fall 6.1 percent from 5.38 MHa in MY11/12 to 5.05MHa due to the financial lure of competing crops. The 2011 spike in planted area, in response to historically high cotton prices in 2010 is an anomaly which distracts from the trend that cotton planting area has been declining over time. For the future, planting intention forecasts signal a continuing decline. The Ministry of Agriculture (MOA) forecasts a five percent decline in MY12/13, with a drop in a majority of cotton-producing regions, including Shandong (down 100,000 Ha) Xinjiang (down 53,000 Ha), then Hunan, Hubei, Anhui and Henan, with combined planting intentions down by 53,000 Ha. The China Academy of Agricultural Science’s Cotton Research Institute reports a 6.1 percent fall in MY12/13 cotton planting intentions to 5,085,000 Ha, a dip from its estimated area of 5,416,000 Ha in MY11/12, with the Yangtze River Region down 4.1%, Yellow River Region down 8%, and the Northwest Region down 3.4% (North Xinjiang down 2.7%, South Xinjiang down 3.3%). China Cotton Association (CCA), in December, forecast MY12/13 cotton planting intention down to 5.2MHa, a 10.5 percent drop over the previous year, with the Yangtze River region down 10.8%, the Yellow River region down 16.5%, and the Northwest region down 5%. The National Cotton Market Monitoring Network showed MY12/13 cotton planting intention down 8.2 percent from the previous year to 4.8MHa. China Cotton Area and Production by Major Sources Planted Area (1,000 Ha) MY11/12 MY12/13 Change% NSB 5,040 NA CCA Dec 5,810 5,200 -10.5% CCA Mar 5,810 4,840 -16.7% MOA 5,040 4,800 -5.0% CRI 5,416 5,085 -6.1% NCMMN Mar* 5,294 4,812 -9.1% Post 5,380 5,050 -6.1% *Intention comparison Yield In general, China’s average cotton yield by individual province/autonomous region varies significantly, ranging from 971Kg/Ha in Anhui to 1,747Kg/Ha in Xinjiang. MY11/12 average cotton yield was 1,310kg/Ha (NSB total production divided by planted area). MY12/13 average cotton yield is forecast at 1,356Kg per hectare. Yield improvements as a result of Bt cotton use is expected to remain strong in MY12/13, potentially reaching 100 percent in Henan, Hebei, Shandong, and Anhui Provinces. The MOA plans to encourage usage of domestically developed “3-line Cross-bred Bt Cotton Varieties” which reportedly increases yield by 25 percent compared to conventional varieties. According to the China Academy of Agriculture Science (CAAS), this domestic variety has been planted on 300,000Ha as of MY11/12 and will be expanded in MY12/13. In Xinjiang’s dry climate, Bt cotton is less prevalent due to a lower risk of diseases/pests. More applicable are the conventional varieties with specific traits, such as dwarf plant size and early maturity, which continue to raise yields in Xinjiang. The Xinjiang Production and Construction Corp (PCC) farms, which are organized over a larger area, incorporate particular agronomic practices, such as high density sowing, plastic sheet covering, and drip irrigation technology to improve yields. However, increased mechanized harvesting in MY 11/12, which offsets growing labor costs, reportedly had lower harvesting accuracy, compared to hand picking, which reduced overall per hectare yield in Xinjiang. Additional Supply Considerations The State Purchase of Domestic Cotton Program, which establishes a floor price for the purchase of domestic cotton for state reserves and the cotton TRQ regime are government programs enacted to maintain “the domestic cotton supply/demand balance.” The State Purchase Program had been suspended for the past two marketing years due to high market prices but was revived in MY11/12 when cotton prices fell below the established floor price of rmb19,800/MT for grade 328 cotton. The Government has already announced an increase in the MY 12/13 floor price to rmb20,400/MT. Stocks The GOC’s current stock reserve is likely to exceed 4 MMT, based on combined purchases of up to 3.13MMT from the MY11/12 crop, (surpassing the 2.89 MMT purchased in MY08/09), an estimated 800,000 MT of imports for reserve and approximately 300,000 MT of carry-in stocks. Given the forecast decline in planting area, the government will likely hold a higher level of stocks in preparation for potential mill demand. Many industry insiders believe the GOC will reserve any state stock release until after the MY12/13 crop is planted to avoid increasing supply at the same time farmers are making planting decisions. Post forecasts MY12/13 ending stocks will remain high at 3.9 MMT, but this forecast will be impacted by many factors including consumption recovery and the price gap between domestic and international marketplaces. The stock to use ratio remains high at about 40 percent in MY11/12 and 12/13. Imports Annual import volume is controlled by the Government of China through a tariff rate quota system. This policy is in place to protect domestic production and regulate supply for textile demand. For MY 11/12, the government authorized 894,000MT of cotton imports (subject to one percent import tariff) and in response to textile industry requests, distributed an additional 1.32 MMT of TRQ subject to a variable tariff rate. This heavy import demand was stimulated by a combination of lower domestic supply due to large government purchases for state reserve and favorable international cotton prices, which in turn partly attributed to the early release of additional TRQ (See table 12). The impact for MY 12/13 imports of high domestic stocks will depend on the balance between many factors, including the health of domestic production, strength of cotton consumption, level of governmental reserves and extent of market intervention measures and the price gap between domestic and world price. Due to its high stock levels and finite warehouse storage capacity, the government is less likely to purchase significant amounts of the MY12/13 domestic crop. This will give mills greater access to domestic supply making them less reliant on imports. (See chart 3-Production: Post’s estimate or forecast; Imports: Global Trade Atlas). Mills will be able to access imported cotton through TRQ’s, but still look to the government to release additional stocks if market constraints dictate. The significant reserve levels remain an uncertainty for cotton trade, especially if the GOC decides to release inventory but restrict additional import TRQ. Depending on the level of government reserves released to mills, cotton imports could decline up to 20 percent in MY12/13, falling to 3.1 MMT from an estimated 3.9 MMT in MY11/12. Consumption Moderate growth of 4.2 percent to 10MMT is expected in China’s cotton consumption in MY12/13. Rising domestic and emerging market demands for apparel and textile products will be counterbalanced by sluggish economic performance in developed markets and an end to China’s economic stimulus package, both of which will slow consumer spending and weaken demand. Depending on the price ratio changes between cotton and synthetic fibers, and depending on the ratio the market demands at the time of production, mills can be expected to adjust the cotton percentage in yarn production more often in 2012. Historically, the price of cotton fiber is approximately 20 percent higher than that of synthetic fibers. Industry experts anticipate that the share of synthetic fibers in yarn production may increase in 2012 due to higher domestic cotton prices. According to NSB, total chemical fiber production in 2011 was 33.8 MMT, up 8.9 percent over the previous year. Due to a period of sustained high cotton prices, the share of “pure cotton” reportedly declined by 5.5 percent while “synthetic yarn” rose 7.2 percent in 2011, respectively, over 2008. Textile Industry Faces New Challenges According to China’s 12th Five Year (2011-2015) Plan, China will support and upgrade the development of the textile sector which employs over 23 million people and is considered a pillar industry. According to NSB, fixed asset investment in the textile industry in 2011 stood at $56.4 billion, up 30.9 percent over 2010. Additional growth is also causing some consolidation as small to medium-scale textile enterprises face multiple challenges, including higher priced raw materials and rising labor costs. The GOC reported that the average monthly wage for the country's migrant workers rose 21 per cent in 2011 from the previous year, and this wage growth trend continued in 2012 as many coastal factories faced a serious shortage of workers in the first quarter. The increase in production costs and likely appreciation of China’s currency are forcing the industry to improve efficiency and productivity to maintain profit margins. China's Textile Sector Production/Investment Trends Change Year/Item 2008 2009 2010 2011 % Yarn Production (MMT) 21.49 23.93 27.17 29 6.7 Fabrics Production (Million Meters) 710 740 800 837 4.6 Chemical Fiber Production (MMT) 24.15 27.3 30.9 33.9 9.7 Fixed Asset Investment in Textile Sector (RMB billion) 153.4 176.8 257 366.9 30.9/26.4 Source: China Economic and Social Development Report by NSB Textile investments in China’s central and western regions (up by 57 percent and 49 percent, respectively over 2010) reflect movement toward lower labor inputs and a favorable investment climate. According to the following table, 2011 yarn production for central and western provinces saw double-digit growth rates (with exception of Xinjiang) while the six coastal provinces only reached seven percent. Steady growth is expected to continue assuming strong domestic and recovering developed market economic demand for China’s textile products. Xinjiang yarn production remains stable. However, industry insiders believe it will increase in the next few years if potential spinning capacity is fully implemented. Domestic Consumption to Increase Domestic consumption of textiles and apparel continues to show steady growth. According to the China Textile Industry Association (CTIA), the domestic market accounted for more than 82.9 percent of the sector’s total sales value in 2011 (up 1.7 percentage points over 2010). With GDP over 9.2 percent in 2011 and expected to exceed 7.5 percent in 2012, growing incomes and rising living standards of Chinese consumers are driving retail consumption to the benefit of cotton products. For example, as indicated in Chart 5, the 2010 per capita expenditures on clothing increased for both urban and rural residents, up 12.5 percent for urban and 12.8 percent for rural over the previous year, with urban residents far outspending their rural neighbors (see Chart 5: Source: NSB and $1=RMB6.7 in 2010). Urban residents bought more, and better quality, products. China’s 674.1 million rural residents are expected to follow this pattern as their incomes rise as well. This will support continued demand for domestic cotton products. Misreporting of Yarn Categories and Volume Continue A long standing problem in consumption forecasting is the difficulty in matching cotton consumption data with finished product figures due to a lack of reliable data. For example, according to NSB, total yarn production for 2011 was reported at 29 MMT, out of which a total of 22 MMT (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, which has ranged from 10 - 11 MMT annually in recent years, and other fibers available for spinning, which cannot produce this large volume of yarn. Over-reporting of total yarn and pure cotton yarn production, under-reporting of synthetic fiber ratio and cotton consumption, or some combination of these, also complicates accurate analysis. China’s industry insiders acknowledge misreporting of yarn categories and volume by mills is the basis for the problem. Trade China’s cotton exports average about 10,000 MT annually, insignificant compared to total cotton use. Cotton yarn and thread trade decreased in MY10/11 with total imports at 848,000 MT (down 18 percent), and exports at 347,000 MT (down 31 percent) over the previous year. The net imported volume remained constant at about 500,000 MT, compared to 537,000 MT in MY10/11. Textile and apparel exports expected moderate growth in 2012 According to NSB, China’s textile and apparel export value surged to $247.9 billion in 2011, up 20 percent from the 206.6 billion in the previous year (See Chart 6; source: NSB) but only 0.5 percent higher by volume. Exports remained weak in the first two months of 2012 with the total export valued at $31.2 billion, slightly lower than the $32 billion in the same period of 2011. Source: NSB U.S. Competes with India for China’s Market In MY10/11 the United States regained its status as China’s largest cotton supplier with total export volume of 1.19 MMT, far surpassing the previous year’s top supplier India (with 631,000 MT in MY10/11). U.S. cotton quality and reliability are attractive to China’s end-users but it faces fierce competition from India’s price and transportation advantages. Indian cotton exports to China reached 829,000 MT, accounting for 38 percent of China’s total imports in the first half of MY11/12 (while the U.S. share fell to 11 percent from the 37 percent in MY10/11). India’s cotton production is expected to continue growing as it incorporates new technology, expands Bt cotton dissemination and actively promotes its product. Consignment Trade Due to strong demand for lower priced imported cotton since late 2011, consignment trade has seen a recovery. With bumper harvests expected from some of the major cotton producing countries, world supplies may ease somewhat and facilitate a resumption of this trade practice. 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. 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 2011, though unpublished, is believed to exceed $175 million (if based on the NSB’s 5.04 MHa planted area for MY11/12). Marketing Transporting Cotton from Xinjiang Province The GOC continues to provide a transportation subsidy of $59 (RMB 400/MT) 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 producing areas. Harvest time can be a bottleneck. The shipping congestion improved slightly in MY11/12 when the GOC 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 2011 conference was held in Dalian, Liaoning 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. Policy Registration System for Overseas Cotton Suppliers On December 8, 2011, the General Administration of Quality Supervision, Inspection and Quarantine of People’s Republic of China (AQSIQ) published "Supervision and Administration Measures for Inspection of Import Cotton (Draft for soliciting comments)". Preliminary review indicates the Measures are a combination of the AQSIQ Announcement No.87 (GAIN 8075) and AQSIQ Circular on Quality and Credit Assessment on Overseas Cotton Exporters (GAIN 9004) with modifications to the Appeal and Dispute Settlement system (Article 23). AQSIQ plans the current comment period to be "the first legislative stage" for the measures and has not confirmed whether the measures will be notified to the World Trade Organization following this "first legislative stage." 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. MY11/12 official classified cotton hit record of 5.51 MMT (as of April10) China’s cotton classification reform is expected to continue in MY12/13. According to China’s Fiber Inspection Bureau (CFIB), more than 1,700 gins participated in cotton HVI classification, up from the 1,514 in the previous year. As of April 10, 2011, total cotton baled and classed on the new classification system reached 5.51 MMT, accounting for 83 percent of the total production in MY11/12 (based on NSB data at 6.6 MMT), up 105 percent over the 2.68 MMT in the previous year. The increase in officially classified volume is mainly driven by the state reserve purchase which requires cotton to be classified. The goal of having domestically produced cotton fully covered by the new classification system remained unfulfilled in MY11/12. Some mills are reluctant to purchase the necessary equipment to enable them to accept the larger bales. As a result, these mills are likely to continue to purchase “small bales” of cotton from gins without “official classification.” They will likely use the excuse that manual handling is more convenient, particularly when supply is tight. The new classing system is expected to help facilitate domestic cotton production estimates and upgrade the quality levels of China’s ginning sector. CFIB MY11/12 classing data (as of April 10) shows 3.37 MMT of Xinjiang cotton was classified, already much higher than the NSB released MY11/12 Xinjiang production of 2.9 MMT, indicating continuing under estimate of Xinjiang cotton production. Targeted Loans In MY11/12, the Agriculture Development Bank of China (ADBC) continued to provide targeted loans with favorable terms for the purchase of seed cotton. Total loans surged to RMB66.2 billion ($10.1 billion, up 76.5 percent over the previous year) for the purchase of 3.27 MMT of cotton (up 75.5 percent over the previous year), thereby significantly facilitating the marketing of seed cotton when prices remained weak and commercial loans declined in MY11/12. Out of the total loans, Xinjiang received the majority with RMB48.6 billion increased 97 percent over the previous year, and covered 2.35 MMT of cotton, double of the volume in the previous year. ADBC will continue to provide financial assistance for domestic cotton marketing in MY12/13. Tables Production, Supply and Demand (PSD) Table 1. PSD (in 1,000 Bales and 1,000 Ha) 2010/2011 2011/2012 2012/1013 Market Year Market Year Market Year Begin: Aug Begin: Aug Begin: Aug 2010 2011 2012 Cotton USDA USDA USDA China Offici New Offici New Offici New al Post al Post al Post 5,13 5,38 5,05 Area Planted 5,100 8 5,500 0 0 5,13 5,38 5,05 Area Harvested 5,100 8 5,500 0 0 15,24 11,67 18,51 Beginning Stocks 15,246 4 11,603 5 9 30,50 33,07 31,46 Production 30,500 2 33,500 0 2 11,98 17,91 14,23 Imports 11,979 3 20,500 3 8 MY Imports from U.S. 5,484 5,512 5,052 57,72 62,65 64,21 Total Supply 57,725 9 65,603 8 9 Exports 122 124 25 46 46 45,93 44,09 45,93 Use 46,000 0 42500 3 0 Loss 0 0 0 0 0 45,93 44,09 45,93 Total Dom. Cons. 46,000 0 42,500 3 0 11,67 18,51 18,24 Ending Stocks 11,603 5 23,078 9 3 57,72 62,65 64,21 Total Distribution 57,725 9 65,603 8 9 Stock to Use % 30 25 54 42 40 1,29 1,33 1,35 Yield 1,289 3 1,326 8 6 TS=TD 0 0 0 0 0 Table 2. PSD (in 1,000 Metric Tons and 1,000 Ha) 2010/2011 2011/2012 2012/1013 Market Year Market Year Market Year Begin: Aug 2010 Begin: Aug 2011 Begin: Aug 2012 Cotton USDA New USDA New USDA New China Official Post Official Post Official Post Area Planted 5,100 5,138 5,500 5,380 5,050 Area Harvested 5,100 5,138 5,500 5,380 5,050 Beginning Stocks 3,319 3,319 2,526 2,542 4,032 Production 6,641 6,641 7,294 7,200 6,850 Imports 2,608 2,609 4,463 3,900 3,100 MY Imports from U.S. 1,194 1,200 1,100 Total Supply 12,568 12,569 14,283 13,642 13,982 Exports 27 27 5 10 10 Use 10,015 10,000 9,253 9,600 10,000 Loss 0 0 0 0 0 Total Dom. Cons. 10,015 10,000 9,253 9,600 10,000 Ending Stocks 2,526 2,542 5,025 4,032 3,972 Total Distribution 12,568 12,569 14,283 13,642 13,982 Stock to Use % 25 25 54 42 40 Yield 1,289 1,293 1,326 1,338 1,356 TS=TD 0 0 0 0 0 Trade Tables Table 3. China’s Monthly Cotton Imports Unit: Metric Tons Month 2007 2008 2009 2010 2011 2012 January 123,092 157,712 77,993 301,359 391,590 326,468 February 125,235 158,168 93,083 221,046 184,216 616,000 March 259,846 213,221 98,763 323,807 276,459 April 215,093 263,417 145,560 323,819 210,453 May 201,205 240,159 151,524 197,955 144,569 June 252,460 211,043 168,619 177,248 120,017 July 228,945 212,580 131,440 168,882 157,087 August 258,667 186,875 109,711 240,172 207,048 September 234,451 129,057 102,162 200,806 252,739 October 137,031 96,155 118,604 96,136 252,315 November 101,846 76,141 112,866 126,203 378,152 December 322,575 168,433 216,776 461,657 790,402 TOTAL 2,460,445 2,112,961 1,527,101 2,841,100 3,367,058 Marketing Aug/07- Aug/08- Aug/09- Aug/10- Aug/11- Year Jul/08 Jul/09 Jul/10 Jul/11 Jul/12 TOTAL 2,609,365 2,510,869 1,523,643 2,374,346 Unit: 480-lb Bales Month 2007 2008 2009 2010 2011 2012 January 565,359 724,373 358,222 1,384,142 1,798,573 1,499,468 February 575,205 726,468 427,529 1,015,264 846,104 2,829,288 March 1,193,474 979,323 453,619 1,487,246 1,269,776 April 987,920 1,209,874 668,557 1,487,301 966,611 May 924,135 1,103,049 695,952 909,207 664,005 June 1,159,550 969,321 774,466 814,100 551,238 July 1,051,545 976,378 603,702 775,675 721,501 August 1,188,058 858,318 503,901 1,103,110 950,971 September 1,076,833 592,759 469,232 922,302 1,160,830 October 629,382 441,641 544,749 441,553 1,158,883 November 467,777 349,715 518,392 579,650 1,736,852 December 1,481,585 773,613 995,653 2,120,391 3,630,316 TOTAL 11,300,825 9,704,831 7,013,974 13,041,950 15,464,897 Marketing Aug/07- Aug/08- Aug/09- Aug/10- Aug/11-Jul/12 Year Jul/08 Jul/09 Jul/10 Jul/11 TOTAL 11,300,825 6,998,092 10,905,371 11,984,813 Source: Global Trade Atlas Table 4. China’s Quarterly Cotton Imports by Country of Origin Unit: Metric Tons Marketing Year: 2009/2010 Country Jul-Sep /09 Oct-Dec /09 Jan-Mar/10 Apr-Jun/10 TOTAL India 53,627 183,167 397,165 172,760 806,719 United States 130,250 86,299 224,010 301,423 741,982 Uzbekistan 27,844 11,109 101,274 109,906 250,133 Australia 37,479 31,568 21,841 29,950 120,838 Burkina Faso 27,320 39,029 14,121 20,488 100,958 Cameroon 10,125 10,913 14,060 5,693 40,791 Brazil 5,329 17,308 12,558 4,977 40,172 Pakistan 1,437 12,290 7,691 1,448 22,866 Cote d Ivoire 7,243 4,397 2,184 8,310 22,134 Mali 4,395 6,697 1,840 9,762 22,694 Benin 22,038 12,250 1,046 19,621 54,955 Other 16,226 33,219 48,421 14,684 112,550 TOTAL 343,313 448,246 846,211 699,022 2,336,792 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 78,544 602,910 681,454 Australia 280,665 208,774 489,439 United States 98,835 147,563 246,398 Brazil 17,674 191,260 208,934 Uzbekistan 43,257 47,600 90,857 Burkina Faso 26,098 22,893 48,991 Mali 20,855 10,122 30,977 Other 565,928 1,231,122 0 0 1,797,050 World 616,874 1,420,869 2,037,743 Source: Global Trade Atlas Table 5. China’s Monthly Cotton Exports Unit: Metric Tons Month 2008 2009 2010 2011 2012 January 221 581 86 3,641 0 February 393 606 0 5,108 March 811 2,969 578 1,908 April 962 193 1136 5,240 May 854 887 1474 6,124 June 655 348 461 1,058 July 866 1,401 86 820 August 2,043 830 1052 1,097 September 3,503 114 1240 456 October 2,451 97 255 0 November 1,916 8 55 90 December 1,687 215 31 157 TOTAL 16,361 8,249 8,464 27,710 Marketing Year Aug/08-Jul/09 Aug/09-Jul/10 Aug/10-Jul/11 Aug/11-Jul/12 TOTAL 18,584 5,084 26,532 Unit: 480-lb Bales Month 2008 2009 2010 2011 2012 January 1,014 2,670 395 16,723 0 February 1,805 2,785 0 23,461 March 3,726 13,635 2,655 8,763 April 4,421 888 5,218 24,067 May 3,921 4,073 6,770 28,128 June 3,007 1,597 2,117 4,859 July 3,979 6,437 395 3,766 August 9,381 3,812 4,832 5,039 September 16,088 522 5,695 2,094 October 11,256 446 1,171 0 November 8,800 35 253 413 December 7,747 988 142 721 TOTAL 75,145 37,887 38,875 127,272 Marketing Year Aug/08-Jul/09 Aug/09-Jul/10 Aug/10-Jul/11 Aug/11-Jul/12 TOTAL 85,356 23,353 121,861 Source: Global Trade Atlas Table 6. China’s Monthly Cotton Yarn and Thread Imports Unit: Metric Tons Month 2008 2009 2010 2011 2012 January 59,448 38,702 102,478 90,812 65,637 February 42,289 61,569 58,667 50,986 March 73,161 78,186 103,588 78,041 April 73,963 81,291 93,393 53,412 May 69,424 78,993 85,614 43,123 June 63,709 84,389 74,473 40,781 July 70,838 88,031 75,036 54,851 August 57,922 81,865 80,202 63,562 September 59,406 88,651 82,571 75,369 October 58,069 77,214 75,846 83,269 November 46,705 90,793 94,145 79,225 December 50,603 105,186 102,953 90,537 TOTAL 725,539 954,871 1,030,976 805,979 Marketing Year Aug/08-Jul/09 Aug/09-Jul/10 Aug/10-Jul/11 Aug/11-Jul/12 TOTAL 783,866 1,036,959 847,723 Source: Global Trade Atlas Table 7. China’s Monthly Cotton Yarn and Thread Exports Unit: Metric Tons Month 2008 2009 2010 2011 2012 January 37,114 25,208 39,795 30,243 19,420 February 28,436 26,468 24,800 20,323 March 55,410 39,808 48,377 48,893 April 54,685 45,606 44,305 35,205 May 50,120 42,557 49,254 23,469 June 46,381 47,772 48,430 21,395 July 45,580 43,592 39,325 18,717 August 39,480 37,850 29,464 18,998 September 36,414 41,776 24,584 18,095 October 33,036 36,413 28,400 19,404 November 28,855 44,509 35,875 17,802 December 26,744 45,598 28,083 22,684 TOTAL 482,255 477,157 442,702 297,239 Marketing Year Aug/08-Jul/09 Aug/09-Jul/10 Aug/10-Jul/11 Aug/11-Jul/12 TOTAL 435,540 500,431 344,651 Source: Global Trade Atlas Table 8. China’s Monthly Cotton Fabric Imports Unit: 1,000 Square Meters Month 2008 2009 2010 2011 2012 January 82,988 45,848 47,637 47,059 34,758 February 56,821 55,264 34,968 35,221 March 81,949 68,193 61,634 60,125 April 94,619 75,033 67,449 56,649 May 84,718 66,003 61,830 47,997 June 73,092 63,213 56,340 45,392 July 76,626 65,614 63,384 48,742 August 72,614 61,830 63,203 55,200 September 82,838 70,214 68,941 56,258 October 84,724 69,609 61,072 54,614 November 81,936 69,042 65,074 60,027 December 76,055 85,019 65,676 53,163 TOTAL 948,983 794,882 719,218 622,458 Marketing Year Aug/08-Jul/09 Aug/09-Jul/10 Aug/10-Jul/11 Aug/10-Jul/11 TOTAL 837,335 748,957 665,152 Source: Global Trade Atlas Table 9. China’s Monthly Cotton Fabric Exports Unit: 1,000 Square Meters Month 2007 2008 2009 2010 2011 2012 January 425,476 507,658 405,793 548,804 607,713 521,312 February 411,280 370,832 232,178 407,887 273,943 March 392,312 489,945 472,667 464,281 563,878 April 496,096 533,580 468,673 593,772 584,655 May 439,481 472,541 438,233 586,272 535,058 June 424,101 487,795 437,932 599,377 468,256 July 439,774 486,933 455,192 600,973 566,527 August 474,342 514,674 468,003 566,068 520,819 September 507,569 523,854 563,082 627,066 543,470 October 490,385 506,479 510,625 598,422 544,839 November 546,508 447,964 578,917 656,363 613,750 December 513,499 419,117 669,986 594,502 619,982 TOTAL 5,560,822 5,761,372 5,701,281 6,845,796 6,444,901 Marketing Aug/07- Aug/08- Aug/09- Aug/10- Aug/10- Year Jul/08 Jul/09 Jul/10 Jul/11 Jul/11 TOTAL 5,560,822 5,322,756 6,591,978 6,642,450 Source: Global Trade Atlas Other Tables Table 10. Cotton Planted Area and Production by Province Planted Area (1,000 hectares) Year 2008 2009 2010 2011 2012* Post - Total 5,950 5,300 5,138 5,380 5,050 NSB - Total 5,754 4,952 4,850 5,040 Xinjiang 1,719 1,409 NA 1,640 1,920 Shandong 888 800 766 766 666 Hebei 690 620 582 633 570 Hubei 543 460 480 489 495 Henan 606 537 467 397 387 Anhui 390 352 344 350 341 Jiangsu 300 252 236 239 206 Hunan 183 153 175 NA Jiangxi 67 76 NA NA Gansu 73 56 NA NA Shanxi 89 73 NA NA Tianjin 69 56 NA NA Shannxi 85 62 NA NA All other total Other 52 46 NA NA 224 Production (1,000 MT) Year 2008 2009 2010 2011 2012* Post - Total 7,990 7,050 6,400 7,200 6,850 NSB - Total 7,492 6,377 5,970 6,600 Xinjiang 3,026 2,524 2,479 2,898 3,355 Shandong 1,041 921 724 785 763 Hebei 737 605 570 653 591 Hubei 513 480 472 523 507 Henan 651 517 447 382 415 Anhui 363 346 316 378 331 Jiangsu 326 255 261 247 269 Hunan 247 212 227 NA Jiangxi 112 125 NA NA Gansu 107 95 NA NA Shanxi 123 84 NA NA Tianjin 83 71 NA NA Shannxi 101 86 NA NA All other Other 62 56 NA NA total 305 NSB-Average Yield(Kg/Ha) 1,302 1,288 1,231 1,309 1,356 Source: Data from 2008 to 2011 is based on NSB; 2012 data is forecast by Post. Table 11. Cotton Tariffs as of January 1, 2012 (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, 5201- 1 125 including degreased cotton -in qouta 0000.01 13 13 Cotton, not carded or combed, 5201- 0 0 including degreased cotton - tarrif and 0000.80 out of qouta, interim 13 13 Cotton, not carded or combed, 5201- 40 125 including degreased cotton -out of 0000.90 quota 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 5203- 40 125 quota 0000.90 17 13 Cotton sewing thread, containing 5204-1100 5 40 85% or more by weight of cotton 17 16 Kg 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 thread), containing 85% or more to by weight of cotton, not for retail 5205-4800 sale 17 16 Kg Cotton yarn (other than sewing 5206-1100 5 40 thread) containing less than 85% by to 5206- weight of cotton, not put for retail 4500 sale 17 16 Kg Cotton yarn (other than sewing 5207-1000 6 50 thread) put up for retail sale- containing 85% or more by weight of cotton 17 16 Kg Cotton yarn (other than sewing 5207-9000 6 50 thread) put up for retail sale-Other 17 16 Kg Woven fabrics of cotton, 5208-1100 10 70 containing 85% or more by weight of to cotton, weighing not more than 200 5208- g/square meter 5990* 17 16 M/Kg *Except: " 5208-2300 12 70 17 16 M/Kg Note: VAT--Value Added Tax; ED--Export Drawback Rate; Source: PRC Customs Import & Export Tariff, 2011 Table 11. Cotton Tariffs as of January 1, 2011 (continued) Description HS Code M.F.N.(%) Gen(%) VAT ED Unit 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; Source: PRC Customs Import & Export Tariff, 2012 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 MT (as of this report added 1.32 MMT of TRQ subject to variable import duty; 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)
Posted: 13 May 2012

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