By Xi Jin
Manager of International Cooperation
China National Cotton Information Center
Beijing, China
Surviving Global Competition
Chinese textile mills are losing their competitiveness. Soaring costs of production permeate China’s economy. Moreover, as costs have risen for labor, energy and raw materials, environment protection rules and the RMB currency exchange rate have further aggravated the situation. For Chinese textile mills, these trends are unavoidable. In fact, the challenge for Chinese mills is how to make structural changes in order to survive the fierce global competition. This is a top priority. Leaving aside other factors, the price and availability of cotton, as a key raw material of textile production, have been serious concerns for Chinese textile mills. Furthermore, these concerns have only become more worrisome after China launched an aggressive government- sponsored reserve procurement program designed to support much higher prices than in the past.
High-End Spinners Want Quality
Cotton production in China has no advantage in comparison with most major cotton producers in the rest of the world. Most Chinese cotton farmers are small growers utilizing less than one acre of land on average. Further, urbanization has accelerated throughout China, reducing available land for farming and heightening competition between cotton and other crops. The cotton price in China will only go up no matter if there is a reserve procurement program supporting high prices or not. As a result, Chinese cotton spinners producing low-end products cannot make a profit. Even so, producers of high-end yarn can enjoy good profit margins, if the mills maintain efficient production facilities and utilize quality cotton. So, building a sustainable supply of quality cotton is the lifeline of Chinese textile mills.
It seems that many Chinese cotton growers prefer to grow inferior cotton by focusing exclusively on yield. The price of Chinese-produced cotton is lower, as a result, but it also fails to meet the quality demands of many high-end Chinese spinners. Because of this mismatch, development of the cotton industry in China faces serious problems. If those problems cannot be solved, more and more textile mills will turn to the cotton imported from other countries to meet quality requirements.