No hike in cotton import quota for 2015

Decision aimed at boosting sales of domestic produce

China will not increase its cotton import quota for 2015, in a bid to encourage textile firms to buy more domestic cotton, the country's top economic planner said Monday.

Besides an annual import quota of 894,000 tons of cotton that China promised under its WTO commitments, no additional quota will be issued for 2015, Liu Xiaonan, deputy head of the economy and trade department under the National Development and Reform Commission (NDRC), told a press conference in Beijing.

Imported cotton within the quota enjoys a low tariff of 1 percent, but the imports beyond the quota are subject to up to 40 percent duty.

Analysts expect the new quota policy will lower China's cotton imports, which hit a record high of 5.14 million tons in 2012.

"Besides the promised annual quota since 2004, China has normally issued additional import quotas under a sliding-scale tariff system [which levies high tariff rates on cheap imports and low rates on high-price imports] in the past years," Sun Liwu, an industry analyst with Shandong-based commodity consultancy Sublime China Information, told the Global Times Monday.

"The decision not to grant an additional import quota is within expectations given the large State cotton reserves," he said.

"The market is now waiting for details on how the quota will be allocated, for instance, whether the quota will be linked to purchases of domestic cotton," Sun said.

China began to implement a trial program of subsidies to cotton farmers in Northwest China's Xinjiang Uyghur Autonomous Region this year to replace a three-year nationwide government stockpiling.

China is the world's largest consumer of cotton, and Xinjiang produces more than half of the country's cotton.

Zhou Wangjun, deputy head of the price department under the NDRC, estimated that the program will help lessen cotton price gap at home and abroad and lead to a drop in China's cotton imports.

The price gap has been reduced to around 2,000 yuan ($324) per ton, he told the conference, compared to 5,000-6,000 yuan per ton in 2012.

As a result, China imported 1.88 million tons of cotton in the first eight months of 2014, a decline of 37.9 percent year-on-year, data from Chinese customs showed.

Textile companies also expect the trial program will help lower their production costs.

"We've already run out of our import quota for this year, and cheaper domestic cotton can help us lower raw material costs," Xu Yongzhi, head of Xinjiang Ruisheng Textile Co, told the Global Times Monday.

But Xu said besides the relatively lower price of imported cotton, its higher quality is also an attraction.

"We are aiming to build up our brand, so purchasing high-quality raw materials is important," he noted.

Xinjiang authorities on Wednesday released details of the trial program. If cotton market prices fall below the target price of 19,800 yuan per ton, farmers will be subsidized based on a combination of their growing areas and the volume they sold.

Farmers in other major cotton-growing areas will also get subsidies, and the amount will be decided by the Ministry of Finance later, NDRC's Zhou noted.