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What Is The Potential Impact Of Cotton Ban In Xinjiang?

2020/9/16 11:42:00 0

Xinjiang Cotton

After the United States announced action against the Xinjiang production and Construction Corps at the end of July, it was reported in early September that the United States might plan to ban the import of cotton containing textiles from Xinjiang. In 2020 / 21, Xinjiang is expected to account for 90% of China's cotton production. What does the ban of the world's largest clothing importing country (the United States) on China's largest cotton producing area (Xinjiang) mean for the global market?


Since the report on the ban was issued, Zheng cotton futures fell. Cf2101 fell from 12900 yuan / ton to 12600 yuan / ton from September 7 to September 11, a decrease of 2.3%. At the same time, other financial markets also showed a relatively sharp decline. Oil prices, technology stocks and several major stock indexes all fell in the same period. In contrast, ICE Futures seem to have little response, and it seems difficult for the market to clearly define the impact of the ban on cotton prices.


According to the analysis of foreign media, the potential impact of Xinjiang cotton ban on cotton supply and demand is still unclear, which may lead to further shuffling of the supply chain. However, China's cotton imports may offset this impact. China recently announced a quota of 400000 tons of processing tax. As long as the textile export can prove that it does not contain Xinjiang cotton, it is possible to avoid being restricted by the Xinjiang cotton ban.


Since September 2019, the United States continues to impose tariffs on Chinese made garments. From September 2019 to July 2020, China's share of US cotton apparel imports fell from 28% to 22%. Over the same period, ASEAN countries surpassed China in terms of clothing quantity, and the market share increased from 24% to 29%. However, countries other than China may use Chinese yarns or fabrics, so the US ban on Xinjiang cotton may need to track Chinese raw materials.


It is not easy for us customs to trace the origin of cotton. 70% of China's cotton spinning and yarn production needs Xinjiang cotton. If the United States implements this ban, theoretically speaking, the United States Customs will reject most of the textiles and clothing from China. What's more, cotton products and clothing from other countries will also contain Xinjiang cotton, which is very difficult to operate. As is the case with organic cotton or BCI cotton, the lack of an effective blockchain system and potential fraud makes it impossible to seriously expand policies based on the source of products. In addition, cotton fibers from different sources are mixed in many spinning machines before yarn is produced, which makes it difficult to determine the source of the fibers.


To sum up, at this stage, the ban still faces many problems, including whether the ban will be actually implemented, but the increase of procurement costs related to traceability, the increase of costs related to supply transfer and other uncertainties may affect the order quantity and have a certain impact on cotton consumption.


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