Tuesday, March 9, 2004
China textile industry seeks open cotton market
Reuters Beijing, March 9
China's embattled textile sector wants the government to free up the national cotton market this year to allow the industry to compete in global markets on an equal footing, a senior industry official said on Tuesday.
The call comes as the industry reels from rising domestic cotton prices over the past year after a poor harvest in 2003 and increasing imports that are battling long-protected textile players for market share at home.
China's textile industry has been accused of dumping products on the European Union (EU) and the United States which said in November it would slap quotas on selected Chinese textile imports if no agreement was reached by March 23.
China's massive textile industry is the world's single biggest consumer of cotton.
"We feel the conditions are ripe" for freeing up the market, Du Yuzhou, president of the China National Textile Industry Council, told Reuters on the sidelines of an annual parliamentary meeting.
"This may happen this year or next year," he added.
Opening cotton markets would boost supply locally, driving down prices, Du argued.
Chinese textile products have long benefited from the country's low labour costs, but rising prices are beginning to take away that edge.
Since 2003, China has taken the initiative to hike import quotas over and above pledges made under World Trade Organisation commitments, driven by international pressure.
This year, Beijing will raise the limit on imports to one million tonne, versus the 894,000 tonne it has promised for 2004, Du said in an interview.
Strong textile exports, which grew an annual 20 per cent over the past three years, have pushed domestic cotton prices to as high as 18,000 yuan ($2,175) per tonne.
That is far higher than the NYCE May cotton prices, at 67.01 cents a lb, on Monday.
"If the domestic price is in line with the international, China's textile industry would have more advantage," he said.
Still, industry analysts say high prices are tempting farmers to give up growing wheat and shift to cotton this year, despite efforts by the central government to maintain grain acreage to feed its 1.3 billion people.
Cotton acreage in 2004 could grow 15 per cent this year from 2003, industry officials say.
Demand from textile mills was exceeding domestic production capacity, while acreage was limited as the crop grows at the same time as grains, Du said.
The textile industry needed about six million tonne of cotton a year, but domestic production stood at five million tonne, Du said. That means the industry has to source its raw material both from home and international markets to develop.
"We don't expect farmers to all shift to grow cotton, otherwise, we will not have enough grain to eat," said Du in the lobby of a hotel in west Beijing.
Du also said China needed to establish a domestic cotton futures market. China is expected to launch cotton futures in the first half of the year, the China Daily quoted exchange officials as saying on Monday.
"How can we have an orderly market after we open? A cotton futures market would help stabilise prices," he said.
© Hindustan Times Ltd. 2004.