China Moves to Curb Cotton Price Hikes

In the notice the departments, including the State Development and Reform Commission, require the country's cotton dealers to speed up the sale of cotton and reduce cotton stockpiles to meet the demand of cotton-dependant textile mills.

Domestic cotton prices have surged 30 percent in the past three months and forced the textile manufacturers to turn to imported products, resulting in higher costs for the textile industry, the notice pointed out.

In comparison, the price rise of textile products is around 20 percent, leading to narrowing profit margins for China's textile companies, according to market analysts.

They said some textile mills have been forced out of business following the cotton price hikes.

The notice added that only half of the country's cotton stockpile, most of which has been purchased with bank loans, has been sold in the 2002 fiscal year.

To speed up sales of domestic cotton, the departments have set a time limit for cotton dealers to repay bank loans, according to the notice, and the country will stop issuing bank loans for cotton purchases in the fiscal year 2003.

China's cotton price index has outpaced the global market. The latest price index released this Monday is 13,362 yuan (US$1,616) a ton, 422 yuan higher than on the world market.

Cotton imports in March reached 125,000 tons, nearing last year's total, according to the Ministry of Commerce.

Market analysts worry that cotton prices could continue to soar until September, when new cotton hits the market, if the government doesn't intervene.