China Boosts Cotton Imports to Mend US Trade Ties

According to the China Cotton Association (CCA) on Monday, China is set to boost cotton imports by issuing additional import quotas to mills. The markets see the move as another big step towards meeting the demands of the top exporting country, the United States.

The CCA lobbies the Chinese government on behalf of cotton and processors. It said that the additional quotas, which are soon-to-be-released, were one of the measures the government was taking to help relieve recent market volatility.

A China-based trader with an international firm said that China’s move is related to the recent trade talks between the country and the United States.

On the recent talks with the United States, China agreed to increase its purchase of US goods and services. The US is China’s top cotton supplier, shipping about 500,000 tons in the previous year.

This makes the cotton the third-most vulnerable US farm export, after soybeans and hides & skins.

Basically Sufficient

The CCA said that the supplies were “basically sufficient”, and “abnormal fluctuations in the market are influenced by speculation and other factors.”

China’s cotton output this year is expected to remain flat, with natural disasters about the same just like the previous years, the association added.

Furthermore, the CCA said that the state sales could be extended until the end of September if market supplies are scarce, and it urged the Chinese government to strengthen its supervision of the futures market and prevent speculation from impacting the sector.

China was once the world’s top cotton importer. However, the country’s imports decreased from more than 5 million tons in 2011-2012 to about 1 million tons in 2017, due to efforts to reduce domestic stockpiles.

After several years of talks to lower its stocks and with demand recovering, the Chinese market has become concerned about supplies. Its domestic cotton futures rallied nearly 18 percent since Early April.

The country has restricted its imports since 2014, due to its commitments to the World Trade Organization (WTO). As a result, China offered only 894,000 tons in tariff-rate quotas needed to be allocated.

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