Cotton has been one of the hottest agricultural import items since China's WTO accession. Much of this cotton is manufactured into garments that are re-exported.
The slowing U.S. economy may be slowing the Chinese export machine. A Sept. 24 article reports that blazing growth of textile exports slowed in August to just 2.8% above year-earlier exports. Textile/apparel exports grew 12% in 2007 and that was down from over 20% growth in 2006.
The slow-down in textile demand combined with burgeoning domestic cotton supplies translates to a slowing of cotton imports. Cotton imports were down 27% year-on-year in August. Domestic cotton is in excess supply, especially in Xinjiang autonomous region in China's far west (the biggest cotton-producing region). According to railroad statistics, in 2007 cotton transported from Xinjiang totaled about 2.93 mmt, about 8.7% higher than the previous year. Approaching the end of the current market year, by the end of august Chinese cotton enterprises had sold 92.5% of their cotton, about 5 percentage points less than the same time last year. It is estimated hat at the end of August there was about 500,000-600,000 mt of cotton to be sold, of which about 200-300,000 mt was from Xinjiang Autonomous region. This cotton needs to be sold before new-harvest cotton comes on the market in the next half-month or so. Cash prices fell about 1% in August and the September contract on the Zhengzhou cotton exchange was down 4.6%.
It is believed that the government commission bought cotton produced in 2007 for reserves during the last ten days of August to alleviate the cotton surplus in Xinjiang. The price was believed to be as high as 13,600 and 13,400 yuan/mt. By August 31, a total of 80,500 mt had been traded. Of that, 60,600 mt was purchased in eastern regions of China at an average price of 13,597 yuan, and 19,900 mt was purchased in Xinjiang at 13,398 yuan by some 40 Xinjiang enterprises.