China's Rapid Cotton Consumption at Crossroads With Anti-Dumping Charges
Source: Interfax-China Date: 2006-12-11
After entering the World Trading Organization (WTO) in 2001, Chinese textile enterprises benefited from the gradual elimination of global textile quotas. However, worries are mounting in recent months over whether the rapid growth in cotton consumption can continue, given the increasing number anti-dumping cases and trade disputes targeting China's textiles sector.
From 2002 to 2005, China's cotton consumption increased from 6 million tonnes to 9.7 million tonnes thanks to the rapid growth of Chinese textile exports.
"In 2005, China's textile exports stood at $115.03 billion, accounting around a quarter of the world's total. The buoyant textile export really boosts Chinese cotton demand," Zhang Weiwei, a textile expert with Tianxiang Investment Consultancy said.
Chinese cotton imports stood at 0.18 million tonnes, 0.87 million tonnes, 1.91 million tonnes and 2.57 million tonnes respectively from 2002 to 2005.
In the January to October period alone, Chinese cotton imports amounted to 3.25 million tonnes, representing an annual increase of 62.4%.
However, as China's textile exports increased, so did opposition and protectionism overseas. Chinese textile exports have been targeted by an increasing number of anti-dumping cases in the past two years, Sun Jiwen, the vice director of Foreign Trade Bureau under the Ministry of Commerce, recently warned
U.S. and European countries in particularly were cautious over sharp Chinese textile export growth and might continue to set anti-dumping or technological barriers like formaldehyde overproof in 2007 to curb the growth, Sun said.
Cotton touched 60 cents per pound in August, but has fallen back since now trading at 53.20 cents per pound. In late 2003, the price spike at 85 cents per pound.
Dale Doelling, chief market technician of Trends In Commodities, previously told Resource Investor that cotton could be a surprise over the next 12 months. With the recent break below 50 cents, this market 搇ooks like it could roar into 2007,?he said.
Another threat for textile exports is the continuous appreciation of the Chinese currency the renminbi, which makes Chinese products more expensive and less competitive. By early December, the renminbi has appreciated more than 5% since last July and is expected to rise another 3 to 5% in 2007.
While these challenges will have some negative impact, Chinese textile export growth will remain stable in 2007 and the coming few years, given China's comparative advantage in the textile industry. As a result, stable growth for Chinese cotton demand is also secured, experts suggested.
"Some people are too pessimistic about China's textile exports. The textile industry is labor-intensive, which, at the current development stage, is the very thing China is good at," Zhang Weiwei said. "More trade frictions and currency appreciation will be a drag on some export growth, but the impact will not be very big."
Zhang's analysis is echoed by Chen Wei, a garment trader in Fuzhou, capital city of coastal Fujian Province.
"Chinese plants can produce cheap textile products at a large-scale. So far, there are no other countries that can do these two things at the same time," said Chen.
Chen also said Chinese textile exporters can to a great extent absorb any additional costs from renminbi appreciation, as no one wants to lose business.
"A lot of Chinese textile exporters won't raise prices when the renminbi appreciates for fear that overseas clients would seek out domestic rivals. The prices for foreign buyers have hardly changed, despite the 5% renminbi appreciation."
If textile exports can maintain stable growth next year, the stable growth of Chinese cotton consumption is guaranteed, Huang Tao from Tiancheng Futures concluded.
"China's cotton consumption is normally closely tied with expansion of the textile industry," according to Huang. "Growth of the domestic textile industry is normally stable on the back of China's upbeat economic growth rate. The fluctuation of textile export growth could shape the change in total cotton consumption."
China's cotton consumption in 2007 is expected to reach 11 million tonnes, including 4.4 million tonnes of imports. By 2010, the total consumption is expected to reach 12.50 million tonnes, with 5 million tonnes coming from abroad.
