Demands for quicker cotton market reforms

The economic benefits of stateowned cotton textile enterprises have declined sharply this year. Some cotton textile manufacturers say that profits from exports during the first half of this year dropped by 50% compared to a year ago. The poor situation of cotton mills has directly affected the entire textile industry in China, experts point out.

In January-April 2001, China's textile exports fell 37.6% on a yearon-year basis to US$15.76 billion. Of this, 100% cotton garments declined by 12.34% to US$2.53 billion. Meanwhile, imports of pure cotton yam sharply increased, 2.54 times higher than the country's total exports of cotton yarn.

The unfavorable economic condition of the textile sector has attracted the attention of many experts. Cotton is the key reason worsening the textile industry, according to experts concerned. The following three factors have seriously impaired normal production at state-owned textile enterprises and further expansion of foreign trade.

(1) Cotton prices in China are inconsistent with the international market. Needless to say, high costs have brought pressure to bear on most cotton mills in China. The cotton textile industry totally used 390,000 tons of cotton and spun 586,000 tons of yarn in March this year. However, the per-ton production cost of 32s cotton yarn was 2,560 yuan (US$307.2) higher than the same yarn spun in Pakistan.

As a result, the competitiveness of cotton spinning mills has been weakening. The profits gained by the cotton textile sector from main products decreased 530 million yuan (US$63.6 million) in first quarter of this year due to a reduction in the world's market share and a sharper decrease in economic benefits.

Moreover, the difference in regional cotton prices has also influenced the sales prices of domestic cotton mills to a great extent. For instance, cotton buying prices were at 440-560 yuan/50 kg (US$52.8-67.2) in Shandong Province, 420-520 yuan (US$50.462.4) in Anhui Province, and 400460 yuan (US$48-55.2) in the Xinjiang Uygur Autonomous Region.

(2) The home cotton market is still monopolized by state supply & marketing cooperatives. Textile enterprises and cotton & flax companies are, in fact, on an unequal basis in the enjoyment of governmental policies.

Since 1999, the central government has opened the domestic cotton market to allow textile enterprises to directly purchase cotton. However, textile enterprises can only use the nation's commercial loans with much risk when purchasing cotton. The supply & marketing cooperatives can obtain loans from the China Agricultural Bank to purchase cotton without any assumption of responsibility for losses.

(3) The country needs supervision and laws & regulations in the cotton markets at home. There is no denying the fact that because of artificial factors, the cotton quality is very poor, as a lot of cotton contains impurities.