American cotton exports to China are only expected to reach 60% and the cotton textile industry in both places needs to be revitalized urgently
Jul 17, 2019 ｜ by CT
“Due to the adverse impact of Sino-US trade negotiations, American cotton exports to China are only 60% of what we expected.” Gary Adams, president of National Cotton Council of America, told the media during the China Cotton Day held by Cotton Council International (CCI). In the short absence of American cotton in the Chinese market, cotton from Brazil and Australia took the lead in entering the Chinese market. After that, Indian cotton exports to China also continued to grow. In order to restore American cotton exports to China as soon as possible, CCI issued the “American Cotton Sustainable Development Trust Code”, which shows its willingness to promote sustainable development and traceability of cotton production, and to improve product quality through new textile technologies, so as to maintain China’s huge market.
American cotton export pressure
In fact, it is not only the volume of trade between the two countries that is affected by trade negotiations, but also the volatility of prices. In the past 10 to 12 months, the price of American cotton has also declined. “As the National Cotton Council of America, we do hope to continue to urge the two governments to further dialogue on trade frictions, to end trade frictions as soon as possible, and to restore cotton trade between the two countries to normal levels as soon as possible.” Gary Adams said. “It is expected that the American cotton supply for export will reach its highest level since 2007.” Therefore, as the world’s largest cotton supplier, the decline in exports to China has forced the United States to turn to other markets for supplements, of which Vietnam is the fastest growing importer of American cotton. Similarly, according to CCI data, as of May 23, 2019, Vietnam imported 2.717 million bales of American cotton, ranking first among all countries that imported American cotton, and China imported 1.326 million bales ranking second. In addition, Bangladesh’s imports of American cotton also showed a rapid upward trend. It is worth mentioning that 70% of Vietnamese cotton yarn companies are Chinese companies, that is to say, although cotton is exported to Vietnam, it is still used by Chinese people.
In addition to seeking other markets, CCI hopes to contribute to sustainable development and cotton traceability, cooperate with more advanced cotton spinning technology, improve the status of American cotton in Chinese customers, and ensure its competitive advantage with other cotton varieties.
Transformation of China’s cotton textile industry
However, the main pressure that many Chinese cotton textile enterprises are facing at present is not the quality of raw materials, but the management pressure. According to the data provided by SCI99. COM, according to the price trend of cotton and cotton yarn in China, it has been showing a steady and positive situation before mid-April, but then it has shown a clear cliff-like decline. The key event was Trump’s decision to impose tariffs on USD 200 billion worth of Chinese goods, including cotton products and cotton yarn.
However, in Sino-US trade, cotton yarn and other intermediaries account for a small share, but Trump threatened to increase tariffs on an additional USD 325 billion of products in June, including clothing. Although the follow-up Trump statement did not decide to impose a tax on this part of the product, many orders were affected when the signal was unclear, and the market environment suddenly turned, which caught many enterprises by surprise.
However, in addition to external environmental factors, China’s cotton textile industry is facing many difficult problems, the most serious of which is overcapacity.
As we all know, China is the largest cotton textile production country in the world, and the industry is labor-intensive industry. Human cost accounts for a large proportion of the total cost. After the gradual disappearance of the demographic dividend, many Chinese enterprises seek transformation. The direction of cross-border transformation is Southeast Asia, while the direction of domestic transformation is from other provinces to Xinjiang.
As mentioned above, 70% of Vietnamese cotton yarn enterprises come from China, which shows the attraction of low human cost in Southeast Asia to Chinese enterprises, while in Xinjiang, the advantage lies in policy. However, the rapid expansion of new production capacity has made the pressure of overcapacity faced by the domestic government more severe. In 2018, the Xinjiang Autonomous Region Government has strictly controlled the disorderly development of the cotton textile industry. The pressure of overcapacity and the disappearance of the demographic dividend have become urgent problems for the whole industry in the future.
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