Pricing power competition and industrial competition behind Xinjiang cotton boycott

Apr 02, 2021  |  by Zhao Xinhua


Why is the U.S. targeting cotton like it is targeting Huawei? According to expert Chen Jishen’s article, the answer is actually very simple. Unlike the 5G threat, China has effectively replaced the U.S. in the international pricing power in the cotton sector.

The United States was the undisputed number one producer and exporter of cotton in the 20th century, but in the early 2000s, China came from behind to become the number one producer of cotton in the world. Global pricing power for cotton remains with the Intercontinental Exchange (ICE), thanks to America’s first-mover advantage and its highly developed derivatives. However, after a few years, from the upstream production of cotton to the middle of the textile processing, and then to the downstream consumption, China has a complete industrial chain of cotton, the dominant pricing power was naturally put on the agenda.
 
With the introduction of cotton futures in 2004 by Zhengzhou Commodity Exchange, after less than 10 years of development, China has actually acquired the pricing power in 2012 and become the world’s cotton trading center.
 
China’s total cotton output in 2020 was 5.91 million tons, an increase of 21,000 tons or 0.4 percent over 2019. In 2020, China’s cotton output ranked second in the world, after India’s 6.423 million tons, higher than the U.S.’s 4.336 million tons and Brazil’s 2.918 million tons, of which Xinjiang’s cotton accounted for 87.3 percent. The huge demand of China’s textile industry leads to huge import demand. In 2020, China imported 2.16 million tons of cotton in total, an increase of 16.8 percent year-on-year, which is close to the cotton output of Brazil.
 
In recent years, Xinjiang gradually explored a suitable way of development - vigorously develop planting and textile industry. With the advantages of raw materials and electricity prices, Xinjiang has targeted the textile and apparel industry in southeast coastal areas. By the end of 2019, there were as many as 3,251 registered enterprises, and 135,000 new local jobs were created.
 
There are many extended industries in the apparel industry chain. With the relocation of apparel factories to Xinjiang, many supporting industries in the industry chain also provide a large number of jobs, which really improves the lives of local people. Meanwhile, agricultural mechanization covers more than 90 percent of the cotton fields in northern Xinjiang, and the mechanization rate in southern Xinjiang is also increasing year by year.
 
With the support of industry and science and technology, Xinjiang has not only improved its cotton production efficiency, but also improved people’s living standards. The export products of the apparel industry are still very attractive to the European and American people, even with the big stick of tariffs.
 
This situation makes the United States and the West believe that their interests are damaged. They hyped lies about Xinjiang cotton in an attempt to disrupt the supply chain of Chinese products, raise the cost of China’s textile raw materials supply, weaken the competitiveness of China’s textile industry.
 
According to relevant data, the output of China’s textile industry in 2019 has exceeded half of the world’s total output, and China’s textile and apparel exports account for 35 percent of the global total. China is the world’s largest producer and exporter of textiles. The textile industry is a pillar industry of the national economy and also an industry with obvious international competitive advantages.
 
In view of this external uncertainty, Sun Ruizhe, chairman of the International Textile Manufactures Federation and president of China National Textile and Apparel Council, pointed out at the beginning of this year that security and stability are becoming the key factors affecting the layout of the industrial chain. Facing the new changes, it is necessary to accurately grasp the localization and diversification trend of the industrial chain and supply chain. On the one hand, we should consolidate the advantages of domestic industrial manufacturing, strengthen its autonomy, controllability and irreplaceability, and better play the role of people’s livelihood industries. On the other hand, we should expand the opening up and promote the diversified layout of supply chain to reduce market risks and trade risks.
 
The opening and development of China’s cotton textile industry will not end because of the suppression of anti-China and anti-Xinjiang forces. We believe that trust and cooperation are the bridges to overcome difficulties together. Believe in Chinese cotton and support Xinjiang cotton!

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2021.12   

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