China set to revamp cotton sector

China’s cotton policies will evolve based on continued movement toward a market-driven economy, balancing the interests of Chinese cotton farmers against those of textile manufacturers, disposal of the country’s large cotton stocks, and compliance with World Trade Organisation commitments, says the US Department of Agriculture (USDA).

The Economic Research Service of the USDA in a report has concluded that China’s cotton policy during 2011-13 had unintended consequences and became unsustainable as an approach to support the country’s cotton producers, and China has seen its consumption of raw cotton drop sharply.

According to the report, China’s policymakers have signalled their intentions to alter their cotton support to reduce the link between income and price support. There will be a period of transition as a more sustainable set of policies evolve and the policies will differ from those of the United States, reflecting the characteristics of China’s agriculture and cotton industry.

These new policies and the policies of the transitional period will be designed to meet a set of goals, which include sustaining a domestic cotton industry (particularly in Xinjiang) by offsetting the impact of rising wages on the production of a labour-intensive crop, providing China’s cotton yarn producers with access to relatively competitively-priced cotton.

The policies will also address efficient use of government resources available to support agriculture and directing the development of China’s agricultural and industrial sectors to modernise, improve applied technology and value-added per unit of labour, and development of large, integrated enterprises.

China’s agricultural support for cotton is expected to shift from almost total reliance on price supports to a much greater reliance on income subsidies to farmers, utilising a target-price-based system of payments to farmers to offset the impact of lower prices.

China’s ambitious goals for agricultural modernisation are one reason for the decision to make Xinjiang the location for a pilot of this programme—Xinjiang’s farms are larger than those in other provinces, more highly mechanised, and their production system can be more readily integrated into China’s modernised system of cotton quality management through machine classing (HVI).

The full extension of this pilot to other provinces could be significantly influenced by policies to increase the scale of farming in China, directing subsidies to cooperatives and farms created by consolidating a large number of smaller plots.